Hundreds of thousands of families will be better off in the 2024-25 tax year after the government finally admits the child benefit policy introduced 11 years ago was not working fairly. For some, their lives will be improved by up to £3,000.
The changes to child benefit are just one of a number of changes planned for April 6, when the new tax year begins, including reducing national insurance contributions for employees from 10% to 8%.
of High-income child allowance fee Introduced in 2013, it means that child allowances paid to high-income earners are recovered through the tax system. Since then, the income threshold for tax penalties to apply has remained frozen at £50,000 a year, causing more people to be subject to fines.
However, Prime Minister Jeremy Hunt made a number of changes in his Budget in March, including: Increase threshold to £60,000. It’s one of a number of changes that come into effect from Saturday that can be positive or negative for people’s finances.
The Child Benefit Tax was originally announced in 2012 when George Osborne was Chancellor, and has long been controversial. This has affected more than one million households, who have had their money taken back by HM Revenue and Customs, or who have refused child benefit to avoid penalties.
Treasury Secretary Laura Trott said this week that the budget changes were due to the government’send injustice In the child allowance system. ”
As well as raising the threshold to £60,000 a year, the government has halved the rate at which fines are collected, so people will only lose all child benefit if they earn £80,000. Before the changes, those earning £60,000 lost their child benefit in full.
Another change that will come into effect on April 6 is an increase in child benefit, from £24 to £25.60 a week for an eldest or only child. The price increases from £15.90 to £16.95 per week for each additional child.
This means someone earning £60,000 and having two children will receive a profit of £2,212 in 2024-25. If the person has three children, the benefit he receives is £3,094.
Around 170,000 households with children will no longer be affected by the charges, and nearly half a million households will save an average of around £1,300 per household over 2024-25, Mr Trott said.
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By April 2026, the government wants to move to a child benefit system based on household income rather than individuals.
Here are some of the other changes that will take effect on April 6th.
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The main rate of National Insurance Contribution (NIC) paid by employees will fall from 10% to 8%. This follows a reduction from 12% to 10% that took effect in January this year. The Treasury said the average worker earning £35,400 would save more than £900 a year with both cuts.
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The main self-employment NIC rate will drop from 9% to 6%, and the second type self-employment NIC will be abolished. But for many people, the continued “fiscal drag” of freezing personal tax thresholds will eat up many of these gains. By 2028-2029, about 2.7 million more people are expected to pay the higher rate of tax at 40% than if all tax deductions and thresholds were indexed to inflation. According to the Office for Budget Responsibility.
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You can now sign up for multiple ISAs of the same type each year, as long as you don’t exceed your overall maximum ISA allowance. Millions of savers and investors have Isas. There are two main types: Cash Isa and Stocks and Shares Isa, and the maximum amount you can save in an Isa is £20,000 per tax year.
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For investments other than ISAs and pensions, dividend tax relief has been reduced from £1,000 to £500. Sarah Coles, head of personal finance at investment platform Hargreaves Lansdown, said this was down from the £5,000 level when it was introduced in 2016. “Investors also face a dire situation with capital gains taxes,” she says. This is paid based on the profits of investments other than ISAS or pensions. The annual allowance has been cut from £6,000 to £3,000, “bringing it down to its lowest level since the 1980s”, she said.
