By: AJ Chambers | 5 March, 2024

The Tax Implications of Having Young Children


Many people reading this will already be aware first hand, that raising young children is an expensive business. Fortunately, this is recognised by the government, and help is at hand in the form of monthly child benefit payments. This can be vital. Particularly for working parents of small children before they go to school, with the cost of paying for childcare extremely high.

If only it were that simple.


As with most benefits and taxes, there are (understandably) many different rules and thresholds for one to qualify. And the threshold for qualifying for child benefit payments has been set at the same level since 2013, despite significant inflation since then.

I spoke to Andrea Manzini, an FCCA qualified accountant and an Indirect Tax Specialist at MFG. Andrea is a father of 2 young children and is passionate about this issue, and has been campaigning for change through various channels, including writing to 636 MPs and other public figures like Martin Lewis. Andrea has also started a petition to the UK Government to reform the child benefit rules in several ways.


“The most unfair part by far, is that if your partner exceeds the Child Benefit threshold, even if you are earning minimum wage or unemployed, then you don’t get any support.”


Here are the questions I put to him:

JR: Tell me about the issues you see with the current Child Benefit rules and why you feel change is needed?

AM: It is an issue I am passionate about as it just doesn’t make sense. The child benefit threshold currently is £50,000 earnings to stop receiving full support, and tapering to £60,000 to receive no support at all. Earning 50k does not make you rich. Particularly if you are living in the South-East, the costs of living and having a family are very high.

But the most unfair part by far, is that if your partner exceeds the threshold, even if you are earning minimum wage or unemployed, then you don’t get any support. You get nothing. It is unfair and unreasonable. If a married couple were in a situation where they both earned £49,000, they would get full support, but if a couple had one partner earning £60,000 and another earning £30,000, they would get nothing. It just doesn’t make sense!

JR: You have started a petition to the UK Government to change the rules, firstly by increasing the threshold to £70k for individuals, and to introduce a household earnings threshold of £130k. How did you arrive at the £70k figure?

AM: In line with inflation from 2013 when the current threshold was created, this should now be at around 69k, so that is why I went for £70,000.

And I think I have been very reasonable. There was a Minister recently who resigned from his role and publicly said that it was because he could earn more in the private sector; he had 2 kids and a mortgage and his salary of £120,000 was not enough. I’m not suggesting I agree and that the threshold should be that high, but how can it be that a Minister says £120,000 is not enough for him but for everyone else the threshold for them to be comfortable and being a high earner is deemed to be £50,000.


“If you start to earn over the threshold, the child benefit is reclaimed through your tax. And you are already paying 42% tax on earnings at that level.”


Pensioners have their triple lock protection for pension levels, understandably, but it is mad that there is no protection for families.

The threshold is in effect a tax on earnings. If you start to earn over the threshold, the child benefit is reclaimed through your tax. And you are already paying 42% tax on earnings at that level, then losing child benefit, your effective rate of tax is even higher: with 3 children your marginal tax rate in the income tax band £50,000 to £60,000 would be over 70%.


JR: I suppose that the counter argument is that it would cost too much money to increase the threshold and give more relief to more people?

AM: The Financial Times recently estimated that increasing the threshold to £70,000 would cost £2 Billion. The recent National Insurance cut cost £9 Billion to the treasury. So there is money available for tax cuts.

Also, there are various ways this could be offset. Oxfam recently estimated that increasing Capital Gains Tax to be in line with income tax at 40% would raise £20 Billion a year.

JR: It could easily be considered that giving relief to families and helping them have more disposable income might increase the amount earned through VAT, and increase the amount of income tax collected, as some people might feel comfortable increasing working hours to be above the previous threshold earnings.


“The law doesn’t even make distinction for the number of children you have which is crazy. There is a really good argument the threshold should be higher for having more children.”


AM: That is true, in reality the £2 billion cost would be the gross cost, not the net cost. People would spend money so straight away 20% comes back to the Treasury as VAT receipts. Then the added money companies are making, there would be 25% corporation tax on their profits. Not only that but a more productive economy and stimulating economic growth. I think at least 50% of that £2 Billion would be recovered.

The law doesn’t even make distinction for the number of children you have which is crazy. There is a really good argument the threshold should be higher for having more children. You could have one child and earn £45k and get full support, or earn £60k and have 5 kids and get no support.

JR: Do we need to incentivise people to have more children, could it not be argued that having children is a personal choice and people should consider the financial ramifications of that personally?

AM: The reform proposed in the petition has another benefit than easing the pressure on parents, it can also help fix the decline in the birth rate. You need a birth rate of over 2.1 to keep the population at the same level. In was 2 in 2012 but was now only 1.5 in 2023. With a declining birth rate it is difficult to maintain a thriving economy in the long term.


Wider Support

JR: Do you have any support from any MPs so far?

AM: From the 636 emails to MPs, a handful have responded, as have the treasury. Some explaining why they don’t think there can be reform, including from the Treasury, which was disappointing. Although the Conservative MP for Harrow East, Bob Blackman, wrote that “the limit clearly needs to be revised to a much higher figure”. That was really encouraging.

JR: What level of support have you had from the public?

AM: Generally support has been fantastic, even from those that it doesn’t directly affect, those without children or the elderly for example. Most people can’t believe the rules and are shocked it hasn’t been changed.

JR: I think from your petition, just as important as increasing the threshold and having a household threshold, is linking the level to inflation for the future

AM: Yes that is true, and I have tried to be extremely reasonable in the petition, not even linking it to the higher RPI, just the CPI. But that is important so it is an issue that doesn’t come around again in a few years.

JR: From the perspective of the recruitment sector, we see childcare and earnings to pay for childcare as an issue frequently for people looking to make a move, or indeed get back into work.

AM: Yes this is also an issue, and again something that would be helpful to the economy to increase the threshold, there are around 1 million vacancies in the country currently. Fewer people than that classed as unemployed, we have to attract more people back into work or into being able to work full-time hours.


Andrea launched his petition earlier this year, and as with all official UK petitions, needs 10,000 signatures for an official response from the Government.

Andrea’s petition asks the Government to:

  1. Increase the high income charge threshold (before a claimant starts repaying benefits) to £70,000 for single parents and £130,000 (combined) for couples
  2. Annually adjust both child benefit payments and the thresholds above in line with the Consumer Price Index

The introduction of a ‘household threshold’ would correct certain distortions of the current system. E.g. a couple with a combined income of £100,000 split equally (£50,000 each) would get full benefits. While another with the same combined income but with one partner earning £60,000 and the other £40,000 would get nothing

The reform can also help reverting the steep drop in birth rate in the UK by supporting and incentivising families to have more children.


If you would like to show your support to Andrea’s petition, you can do so here, and by showing support on social media: Andrea Manzini

Andrea was talking to Jason Reynolds, Operations Director at AJ Chambers.


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