Conservatives pledge £1,500 tax cut for parents

The Conservatives will cut taxes for 700,000 families by an average of £1,500 as Labour continue to refuse ruling out tax rises of £2,094 per working household to plug their financial black hole. 

We will do this by raising the threshold at which people start to pay the High Income Child Benefit Tax Charge (HICBC) to £120,000, up from £60,000 currently. 

And to end the unfairness that means single earner households can start paying the tax charge when a household with two working parents and a much higher total income can keep Child Benefit in full, we will move to a household rather than individual basis for assessing the tax charge.  

Single-earner households and households where one individual earns substantially more than the other will be the biggest beneficiaries. 

The announcement underlines the Conservatives' commitment to rewarding aspiration, boosting households' financial security and incentivising work by allowing hard-working families keep more of what they earn. 

It builds on our tax-cutting plan announced in April to raise the threshold at which individuals start to pay the Child Benefit tax charge from £50,000 to £60,000. 

These changes have taken 170,000 families out of paying the tax charge, and mean that almost half a million families gain an average of £1,260 to help with the cost of raising their children this year.   

Chancellor of the Exchequer, Jeremy Hunt said:  

“Today we have announced a £1,500 tax cut for parents to boost families' financial security and give them more money to spend on the things that matter most. 

“Raising the next generation is the most important job any of us can do so it's right that, as part of our clear plan to bring taxes down, we are reducing the burden on working families. 

“There is a clear choice for voters at this election: bold action to cut taxes for working families under the Conservatives, or a £2094 tax rise to fill Labour's £38.5 billion spending black hole”.

The pledge is fully funded, paid for by clamping down on tax avoidance, which is expected to raise a total of £6 billion. Labour have said they would raise a similar amount from tax avoidance, but have said they will spend it on other things. 

Notes to Editors:    

Costing and funding

·         Our policy to end the unfairness of the High Income Child Benefit Charge has been fully funded and costed. Increasing the threshold to £120,000 and the taper rate to £160,000 will cost £1.3bn in 2029/30. It will be paid for by our previously announced plan to raise £6 billion from further clamping down on tax avoidance and evasion. So far, of this £6 billion we have committed:

o    £1 billion for National Service

o    £2.4 billion for the Triple Lock Plus

o    £60 million for 30 news towns

·         The Labour Party has said it will raise £5.1 billion from tax avoidance and evasion by the end of the Parliament. It has decided to spend this money on other things. 

In April 2024, the Conservatives reformed the High-Income Child Benefit Charge, cutting tax for half a million families:   

·        In April, the Conservatives reformed the High-Income Child Benefit Charge, cutting tax for nearly half a million families. As of April 2024, the Conservatives raised the threshold for the High-Income Child Benefit Charge from £50,000 to £60,000 and halved the rate so that it is not paid in full until you earn over £80,000 - estimated to support nearly half a million families with an average gain of up to £1,260 in 2024-25 towards the costs of raising their children (HM Treasury, Spring Budget, 6 March 2024, link).    

·        Reforms to the High Income Child Benefit Charge are predicted to boost economic growth and support jobs across the country. The OBR estimated that the changes to the HICBC we introduced this year will increase economic growth and increase the average hours worked by workers employees by an amount equivalent to 10,000 full-time employees (Office for Budget Responsibility, Economic and Fiscal Outlook, March 2024, link).     

However, the current system is still unfair, which is why the Conservatives have set out a clear plan to deliver the support working families across the country need:    

·        We will end the unfairness of the High-Income Child Benefit Charge by moving to a system based of households, cutting taxes for 700,000 households by an average of £1,500 per year. We will ensure that the High-Income Child Benefit Charge is only paid by households with a combined income of more than £120,000 per year and increase the threshold at which Child Benefit is fully withdrawn to £160,000 per household.  

·        Following consultation, we will legislate and deliver these changes by Autumn 2025. Moving to a household basis requires significant reform to how HMRC administers the High-Income Child Benefit Charge and so we will first launch a consultation to resolve the key design issues to deliver the new system by April 2026.