Reforms to High Income Child Benefit Charge and National Insurance in the UK’s Budget aim to provide relief to struggling families amidst the cost-of-living crisis, writes Lee Melling
UK Chancellor of the Exchequer Jeremy Hunt’s recent Budget announcement could have an impact on families struggling financially amid the cost-of-living crisis. Some reforms could provide relief and reshape the landscape of financial stability for households.
High Income Child Benefit Charge
The recent announcement regarding changes to the High Income Child Benefit Charge (HICBC) in the UK's Budget is poised to substantially impact financially struggling families, offering relief amid the ongoing cost-of-living challenges.
Despite the rise in wages attributed to inflation, the perceived inequity of HICBC across various household types and income levels has been a concern. The Chancellor's reform decision, transitioning HICBC from an individual to a household system by April 2026, helps address this issue.
Under the current system, if one parent earns more than £50,000, child benefit starts to reduce, and those who earn £60,000 receive no child benefit at all.
This means two parents earning £50,000 a year or less would each receive child benefit in full, but a household with one working parent or a single-income household earning more than £50,000 would see the benefit cut.
The change creates a fairer system and takes into consideration that people’s wages have risen in line with inflation.
Furthermore, the decision to increase the threshold—especially at a time when many employees have had their salary adjustments in line with inflation—ensures more families retain more of the Child Benefit they receive. It also assures those worried about pay increases affecting their Child Benefit entitlement.
National Insurance
Amid record-high energy bills, rising food costs and mortgage payments, the reduction of the National Insurance by 2p can help ease the financial burden during a period of stretched budgets.
Nevertheless, while these measures offer some relief, additional measures are still required to provide support for households grappling with the escalating cost-of-living.
Despite assurances of a decline in inflation, Chancellor Hunt’s cautious approach in this latest Budget might leave many feeling disappointed that the changes haven’t gone far enough.
As people navigate the adjustments to their finances in response to these changes, it is crucial to recognise the potential stress and anxiety associated with such transitions.
Acknowledging the scale of the situation and seeking assistance, whether through understanding the broad cost-of-living crisis or knowing that others share similar experiences, can help manage the stress associated with an individual’s financial situation.
For those concerned about their financial situation, reaching out for help is important. Equipping oneself with a range of tools and seeking advice can go a long way towards supporting your everyday financial health.
Lee Melling is a Financial Wellbeing expert at Caba, the occupational charity supporting The Institute of Chartered Accountants in England and Wales
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