Child Benefit Payrise (now £35 per week!)

Amongst all the Coronavirus chaos, I’m sure that 90% of people missed out on the news that child benefit increased in April for the first time in years! Good news for a family like ours.

The fact that a change that came into effect in April is only being talked about now tells you a bit about how important Child Benefit is to families and to me but maybe we take it all for granted? It’s actually quite an important payment for us and over time it adds up.

But first of all, what is child benefit?

Child benefit is a benefit that the parents of all children in the UK receive up until the age of 16. It’s also the only benefit you are allowed to claim without you being classed a scrounger!

History

The first benefit for children came in 1909 and was an income tax allowance that reduced the tax bill for middle class parents. Even back then tax seemed complicated, made worse by pounds shillings and pence.

It was not until 1975 that, with the Child Benefit Bill, devised by Barbara Castle was introduced; universal child benefits were paid to children in the UK. A step forward and a real achievement of Barbara Castle; this was a simpler system of universal payment, paid for each child without means testing or income requirements. Importantly, the money was paid to the mother and not the father (who’d just drink it all way, in too many cases).

Originally the rate payable was £1/week for the first and £1.50 for each subsequent child. An addition 50p was payable to lone-parent families. In today’s money that’s £8.50 per week for one kid and a two kid family (like ours) would get £21.20 a week.

Child Benefit in 2020

From April child benefit is now paid at a rate of £21.05 for the eldest child and £13.95 for subsequent children per week. That’s up from £20.70 / £13.70 in 2019 or a massive 1.7% increase! Child benefit pays £35 per week for us or £140.00 every 4 weeks or £1,820 a year. That’s quite a lot of money really – since it’s tax free. To receive the same from investments earning 4% yield in an ISA you’d need £45,500.

Other reasons for getting child benefit

As if getting free money wasn’t a good enough reason, you can also benefit from getting full NI credits to your state pension by claiming child benefit until your youngest turns 12. To claim the full state pension you need 35 years contributions – so kids can get you a third of the there for free!

Beware: tax man giveth and tax man taketh

In 2013 a law was introduced which changed the eligibility of what was a once universal, non-means tested benefit and instead stated that if you (or your partner) earned over £50,000 then the child benefit would be reduced and totally removed if you earn above £60,000.

This is a rather blunt instrument and has caught many out unfairly (so they say). You are able to get round the problem by reducing your “earned” figure which could be by paying into your pension more. But it does end up with the margin tax rate for people losing their child benefit looking very harsh.

Find out more

You can find out more about child benefit here at the gov.uk site.

You can also check your current National Insurance record here at the gov.uk site.

Thanks, GFF

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