The Conservatives have announced a plan to cut taxes for 700,000 families by raising the threshold at which families pay the Child Benefit Tax Charge.
The party has pledged to raise the threshold at which families pay the Child Benefit Tax Charge from £60,000 to £120,000 in what it touts as “major reform”.
The High Income Child Benefit Charge (HICBC) provides for Child Benefit to be clawed back through the tax system from families where the highest earner has an income in excess of the set threshold.
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It is claimed that 700,000 families could benefit by an average of £1,500 as a result of the Conservatives’ proposed changes.
Chancellor Jeremy Hunt has said the policy will “boost” families’ financial security.
Commenting on the announcement, Hunt said: “Today we have announced a £1,500 tax cut for parents to boost families’ financial security and give them more money to spend on the things that matter most.
“Raising the next generation is the most important job any of us can do so it’s right that, as part of our clear plan to bring taxes down, we are reducing the burden on working families.
“There is a clear choice for voters at this election: bold action to cut taxes for working families under the Conservatives, or a £2094 tax rise to fill Labour’s £38.5 billion spending black hole”.
If re-elected, the Conservatives say they will also move to a household rather than an individual basis for assessing the tax charge in order to end the “unfairness” that sees single-earner households start paying the tax charge when a household with two working parents, earning a much higher total income, can keep Child Benefit in full.
Under the current rules, dual income families on £59,000 each (with a household income of £118,000) may not be liable to the charge, but a single parent earning over £60,000 could be.
The Conservatives say single-earner households and households where one individual earns substantially more than the other will be the biggest beneficiaries of the proposed changes.
The party says the pledge will cost £1.3 billion in 2029/30, with the funding coming from its previously announced plan to raise £6 billion from further clamping down on tax avoidance and evasion.
It is the fourth major policy announcement this election which is being funded by the Conservatives tax clampdown pledge.
So far, the party has set aside £1 billion of this £6 billion for the national service scheme, £2.4 billion for the Triple Lock Plus and £60 million for 30 news towns.
The party notes that Labour has said it will raise £5.1 billion from tax avoidance and evasion by the end of the next parliament if elected. “It has decided to spend this money on other things”, the Conservatives said.
This latest pledge comes after the Conservatives raised the threshold at which individuals start to pay the Child Benefit tax charge from £50,000 to £60,000 in the spring budget.
At the time, the Chancellor also announced that the government would consult on reforming the charge so that it would be based on household income, not individual income.
The party claims these recent changes have already taken 170,000 families out of paying the tax charge.
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