Single income families take hit on child benefit change

SINGLE income families will be the hardest hit by the changes to child benefit if their income breaches £44,000, an analysis by KPMG has shown.

While the chancellor’s decision to scrap child benefit for higher rate taxpayers only removes the benefit from those who might arguably be able to afford to live without it the decision will be seen as an unfair tax increase by many.

Under the proposals, from 2013 around 1.2m families in receipt of child benefit will lose their entitlement to it, a move ministers believe will save the Treasury £1bn a year. The measures would only affect those earning over £44,000.

However, an average family of four will find itself £1752.40 worse off each year under
the proposals if one parent earns over the £44,000 limit.

KPMG says that a family where both parents are working, with one earning a salary of £47,000 and the other £25,000 – giving a combined income of £72,000 – would lose 3.29 per cent of its household income.

The picture is worse for single income families with an income of £44,000 as this family would again lose £1752.40 in child benefit. But this would be the equivalent to 5.43 per cent as a proportion of household income, KPMG says.

Meanwhile and somewhat perversely, a typical family of four where both parents earn just under the threshold of £44,000 will still receive child benefit. So a family of four with a combined income of £79,000, would be entitled to claim child benefit despite earning almost twice as much as a single income family.