Stealth tax raid deprives 2m of kid advantages

A stealth raid on families by the Chancellor means 2m have lost some or all of their child benefit, a doubling on levels a decade ago, new analysis has revealed.

The Exchequer saved around £2.5bn from the freezing of child benefit thresholds, taking away child support from an extra 1m families in the last 10 years, according to the Institute for Fiscal Studies.

The figures will raise concerns about the cost of starting a family in Britain as Liz Truss mulls a shakeup in childcare.

The economic think tank revealed that 26pc of families with children now lose some or all of their child benefit, double the share when the thresholds were frozen in cash terms a decade ago. Almost three in 10 families will have seen their child support shrink or disappear by 2025-26 if the freeze continues.

Families receive £21.80 per week for one or the eldest child and £14.45 for every additional child.

Child benefits are tapered if the highest earner in the household makes more than £50,000 and taken away completely if the higher earner makes above £60,000.

However, the tapering threshold has been frozen at between £50,000 to £60,000 since 2013, meaning far fewer families benefit from the support.

The Treasury saves money by freezing tax thresholds through an effect called fiscal drag.

If benefit thresholds are kept steady by the Chancellor, more taxpayers lose out on the support over time as prices and earnings rise. The IFS said the Treasury saves around £2.5bn from the child benefit threshold freeze, based on earlier estimates.

The child benefit tapering thresholds would be between £56,710 and £68,052 if they had risen in line with inflation, according to the IFS.

Tom Waters, economist at the IFS, said: “It affects more and more people and has moved down the income distribution because £50,000 in 2013 meant more than £50,000 today.

“It’s a very weird policy anyway because it has a strange thing that it’s just dependent on the income of the highest earners. You can have a couple where they both earned £50,000, then they get their full child benefit. Whereas another couple where one doesn’t work and the other one earns £60,000, they get nothing.”

Freezing tax and benefit thresholds is expected to provide the public finances a major boost, offsetting the household gains will make from the recent tax cuts.

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