Imminent cuts to child benefit could cost higher earning families as much as £50,000, according to an analysis by accountants PwC.
The firm’s calculations are based on a family with three children aged five, three and one, where at least one partner earns £60,000 or more. The analysis runs from when the cuts are implemented in January 2013 to when the youngest child reaching his or her 18th birthday.
Families with two children will be around £40,000 worse off over the same period, the firm projects. The calculations incorporate estimated inflation over the same period.
Currently child benefit is paid universally at a rate of £20.30 per week for the first child and £13.40 for any additional children. However, this will change from January 2013, when families with at least one partner earning more than £50,000 and living in the UK will be subject to an additional sliding tax to pay back part of the benefit. Families with at least one partner earning more than £60,000 will be taxed the entirety of the benefit. Affected families will need to fill in self-assessment tax forms.
PwC tax partner Alex Henderson said:
“Many people affected by the child benefit cuts have probably not considered what the true cost will be to them over time. Our projections show the cost could be substantial, and could ultimately mean many middle-income families have to work longer until retirement or until they can pay back debts.”