Child Benefit & Childcare

For working parents, there have been some recent changes to the benefits available from the Government, which are coming into force during the 2024/2025 tax year. Two of the main changes were announced in the Spring 2024 budget which affect Child Benefit, as well as the provisions for free childcare.

Child Benefit

Child Benefit is available if you’re responsible for bringing up a child under the age of 16 (or under 20 if they remain in approved education or training). An allowance is paid every 4 weeks which for the 2024/25 tax year is £25.60 per week for the first child and £16.95 per week for each additional child thereafter. This can only be paid to one of the parents, not both.

However, for those earning above £50,000 pa, this previously meant they would suffer the High Income Child Benefit Charge. This applied regardless of which parent was in receipt of the Child Benefit and the charge is incurred at a rate of 1% for each £100 earned over £50,000 pa. Therefore, when income was above £60,000 pa, the High Income Child Benefit Charge was applied in full and the full amount must be repaid.

As an example, a household, with two partners earning £50,000 pa each, would not incur the charge. However, a household with one partner earning £60,000 pa and the other earning £0 pa, would incur the full charge.

Since 6th April 2024, the threshold for the High Income Child Benefit Charge has increased to £60,000 pa and the charge is at a rate of 1% for each £200 earned above £60,000. Therefore, once earnings for an individual exceed £80,000 pa, the High Income Child Benefit Charge is applied in full and the full amount must be repaid.

Individuals who are liable to pay the High Income Child Benefit Charge are required to file a Self Assessment tax return to declare this and pay the charge, each January after the end of the tax year the charge applies.

Going forward there are further consultations planned to base the charge on ‘household income’, rather than the income of the highest earner in the household. These future changes are expected to be implemented by April 2026. There are no further details on how this will work at this time, however.

Childcare

Free childcare hours are now being expanded, and since 6th April 2024, those with 2 year old children have been entitled to 15 hours a week free. From September 2024, children aged 9 months will be entitled to 15 hours a week free, and from September 2025 all children from 9 months old will be eligible for 30 hours a week free childcare.

In order to qualify, both parents must be working and earning at least £9,518 pa but less than £100,000 pa, on an adjusted net income basis. This is income after certain deductions such as pension contributions and gift aid donations.

Eligible parents of 3 year old and 4 year old children already receive 30 hours a week free childcare, so this will not change for them.

For each of these benefits, with some careful planning, it is possible that you can still qualify for them both if you currently don’t due to income levels. As Financial Planners, we assist our clients with such planning where possible.