No doubt you’ll have seen in the press this week that George Osborne has announced the axing of child benefits for higher and additional rate tax payers from 2013; affecting approximately 1.2 million families in the UK. The move, which Mr Osbourn describes as ‘tough but fair’ comes as part of an effort to reduce Government spending and is estimated to save the country £1 billion a year. However, those affected, whether stay-at-home or working parents, may stand to lose out on £2,000 each year without this benefit – a substantial sum for the majority of families.
The introduction of means testing for child benefits is in-line with upcoming changes to childcare vouchers, due to be implemented in April 2011. Previously, both have been applied universally and every parent, regardless of income, was eligible to receive the same amount of child benefit or saving on their childcare vouchers.
However, childcare vouchers have now been means tested and from April 2011, parents on a higher and additional rate tax will receive a lower benefit than those on basic rate tax. Instead of receiving £55 per week as before, higher and additional rate tax payers will only be able to save £28 and £22 per week respectively after the changes take effect. There’s a useful guide from HMRC which explains the changes in full.
This latest announcement would seem to suggest that the government are trying to provide a balanced benefits structure for all; although I think it’s likely to spark debate for a number of weeks.
If you’re going to be affected by the changes to childcare vouchers, or indeed by the removal of child benefit, you should look to optimise your saving potential and join a childcare voucher scheme as soon as possible. Higher and additional rate tax payers that join a scheme before April 2011 will be able to claim the £55 per week saving – if you wait until after that date then the new saving levels will apply.