The Conservative Party has announced plans to ease the burden of child benefit tax for 700,000 families from April 2026.
The party has proposed doubling the threshold for the High Income Child Benefit Tax (HICBC) to £120,000, which should save the average family £1,500.
Currently, the tax charge applies to households where one member earns more than £60,000, with 1% of child benefit refunded for every £200 of earnings above this limit.
At the Budget, Hunt said the government would consult on the possibility of basing HICBC on household income rather than individual income.
The Conservatives have now pledged to deliver on this promise, with an estimated cost of £1.3 billion in 2029-30. Legislation is expected in autumn 2025, with the new system to be implemented in April 2026.
Shift to Household Income Assessment
Under the new scheme, assessment will be based on overall household income rather than an individual's income, eliminating the penalty for families where one parent earns a lot of money and the other does not work.
The policy change will also increase the threshold for full child benefit repayment to £160,000, providing relief for families earning less than six figures.
Current Child Benefit Rates
Child benefit is currently £25.60 a week (£1,331.20 a year) for the first child, and £16.95 a week (£881.40 a year) for each additional child. There is no limit to the number of children for whom applications can be made, with some families applying for more than 13 children.
According to HMRC, nearly seven million families receive these payments, although many have to repay some or all of it due to HICBC. Originally introduced in January 2013, the tax initially applied when one parent or guardian, or their partner, earned more than £50,000.
For every £100 earned over this amount, 1% of the benefit had to be repaid, meaning that those earning over £60,000 had to repay the entire benefit.
Chancellor Jeremy Hunt changed the system in the last Budget by increasing the threshold to £60,000 and reducing the taper, so that families now lose 1% for every £200 earned over the threshold. This is the first change since the HICBC was established in 2013, with an expec
Benefits of the New Rules
With the new rules, households will benefit if one of the members earns more than £80,000, but their combined income is less than £160,000.
They will also help families who previously had to repay child benefit because the top earner earned between £60,000 and £80,000 a year.
Shaun Moore of investment firm Quilter points out that the Conservatives' announcement to link the tax to household income will be welcomed by many parents.
However, he argued that while this adds complexity for HMRC, the benefits of addressing inequalities in the current system outweigh these challenges.