Labor is quietly scrapping child benefit reform that could have made the system fairer for single parents

Many parents will be left out of pocket as the chancellor quietly scrapped planned child benefit reforms in her first budget.

The Government will no longer proceed with reforms to base the High Income Child Benefit charge on a household’s total income rather than the income of the highest earner.

Many believe that this system unfairly penalizes single parents with higher incomes.

A two-parent household earning £59,000 each – a total of £118,000 – will get the full Child Benefit, while a single-parent household earning £60,000 will see some or all benefit withdrawn.

Child Benefit is currently £25.60 per week for the eldest and £16.95 per week for each additional child.

It is paid if you are responsible for a child who is under 16, or under 20 if they are still at school or on an approved training course.

However, the government is starting to claw back child benefit from households where the top earner has an income above £60,000 after Jeremy Hunt raised the threshold from £50,000 in his latest Budget.

Child Benefit is then withdrawn entirely once the highest earner earns more than £80,000.

Hunt has pledged to significantly reform the tax and consult to move to a system based on household rather than individual income by 2026.

Since its introduction a decade ago, it has been criticized for placing an extra burden on working parents, especially single parents.

However, Labor will no longer proceed with the changes, according to a document published on Wednesday by the Treasury.

It said it “would have had a significant tax cost of £1.4 billion by 2029-30 if the threshold had been set at £120,000 to £160,000, where no family would lose out”.

By keeping HICBC based on total individual income rather than per household, more parents will be left out of pocket.

As well as single parents, families where one parent earns more than £60,000 and the other cannot lose.

A couple earning £30,000 and £60,000 will have the higher earners start paying some of their child benefit, while a couple earning £55,000 each will keep all of their child benefit.

If Labor had kept its plans to calculate the tax based on household income, a couple earning £55,000 each would receive no child benefit as they would collectively exceed the £80,000 threshold at which child benefit payments are stopped altogether.

Keeping the child benefit threshold at £60,000 is also not keeping in line with inflation. If the original £50,000 threshold had been improved with inflation since its introduction, it would be £67,000. Meanwhile, if it had risen with average wages, it would be £71,774.

Like frozen income tax thresholds, it creates a huge secret tax raid on working parents.

The government has said it will make some changes to the system, including allowing employed people to pay their HICBC through their tax code starting next year.

This means that parents who are paid via PAYE will no longer need to complete a self assessment tax return.

It also said it would supplement self-assessment tax returns with child benefit data for those who don’t.