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5mo ago

Labour Scraps Child Benefit Reform, Impacting 700,000 Families

The decision to maintain the current system leaves single-income households facing higher tax burdens compared to dual-income families.

Martin Lewis, founder of Money Saving Expert, said Labour’s move was “a shame and leaves inequity rife”
Rachel Reeves used her Budget statement to announce she would not take forward plans to overhaul the way child benefits are calculated for higher earners.

Overview

  • Labour has decided not to proceed with the Conservative plan to reform child benefit calculations based on household income, citing a fiscal cost of £1.4 billion.
  • The current system calculates benefits based on an individual's income, leading to perceived inequities for single-earner and single-parent households.
  • Under the existing rules, households with a single earner making over £60,000 lose benefits, while dual-income households earning just under £120,000 retain full benefits.
  • Critics argue the decision overlooks the financial challenges faced by single-income families, exacerbating existing disparities.
  • Efforts to simplify the repayment process for those affected by the High Income Child Benefit Charge will continue, but broader reforms have been shelved.