CHANGES to the way child benefit is paid means that larger families will suffer a faster fall in income than those with just one child.
Research by the Institute for Fiscal Studies (IFS) said George’s Osborne’s decision to remove child benefit “gradually” from families where one parent earned more than £50,000, meant those with more children would lose income at a faster rate.
Its calculations indicate that the one per cent fall in benefit for every £100 earned over £50,000 meant that an individual’s effective marginal tax rate would rise by 24 percentage points if you had three children, and just eleven percentage points if you had one child.
“In cash terms, you lose child benefit at a faster rate as income rises if you have more children,” IFS director Paul Johnson said.
Child benefit, worth £1,752.40 per year for a family with two children, will now no longer be paid at all to families where one individual earns more than £60,000.
“Gradual withdrawal means people cannot have a lower net income after a pay rise unless they have eight or more children,” Johnson said, saying the reforms were an “improvement” on the original plans.