Child benefit will be scrapped for all higher rate taxpayers in a bid to make the system fairer to low income households and save the government about £1 billion.
Parents who earn over £44,000 and pay 40% tax will be affected by the changes, which are set for 2013. Currently all families with children receive the benefit regardless of their income. Parents are paid £20.30 a week for their eldest child and £13.40 for subsequent children until they reach the age of 19 as long as they are still in full time education.
A family where two parents work and earn under £44,000 collectively will still receive the benefit. However, a family which only has one source of income and earns just above the new limit will not receive payment.
Chancellor George Osborne said: “It’s very hard to justify taxing people on much lower incomes in order to pay the child benefit to some of the better off in our society”.
He continued: “It’s not a decision we’ve taken lightly, but given the scale of the debts Labour’s left us with, and given they’ve left us with no plan and we’ve had to come up with proposals, we think this is fair. It means we’re all in this together. Each part of society is going to be making a contribution”.
However, he added that the proposals are a ‘one-off’ measure and do not signal the end of the principles of the welfare state.
Prime Minister David Cameron said the changes “will have a transformative effect on making sure that everyone is better off in work and better off working rather than on benefits”.