One million more families could lose their child benefit

A MILLION more families are set to lose their child benefit in the next decade because of a ‘stealth tax’ imposed by George Osborne, a study warned yesterday.

A think-tank said the number of better-off households missing out would more than double unless the Chancellor relents and raises the earnings ceiling at which payments stop.

According to the Institute for Fiscal Studies, even basic rate taxpayers could eventually start to lose their child benefit, potentially undermining public support for the payouts.

Controversial rules introduced by Mr Osborne in 2013 mean that families start to lose child benefit if one adult earns more than £50,000 a year.

Households where one person is earning more than £ 0,000 receive no child benefit – costing a family with two children almost £1,800 a year.

The decision to strip better-off families of the benefit provoked a huge row in the Tory party.

In its report, the IFS said the change has affected about 1.1million families while raising about £1.9billion a year for the Treasury.

But, because the Chancellor decided that the income thresholds for losing child benefit would not automatically rise in line with inflation, that figure is set to soar in the coming years as wages increase. ‘In 201 -7, we estimate that 1.1million families will lose some or all of their child benefit,’ said the IFS.

‘If taxable incomes rise in line with the Office for Budget Responsibility’s forecast while the thresholds remain fixed, we estimate that in five years the number of families affected would increase by 50 per cent. In ten years, it would have more than doubled.’

The report pointed out that the Conservatives have pledged to raise the 40p tax threshold to £50,000 by 2020. If the child benefit cut-off remains unchanged, basic rate taxpayers could begin to lose their payments.

The IFS said that if it was the aim to give child benefit to fewer families ‘it would be better to state this clearly rather than achieving it by stealth’.

Last night, a Treasury spokesman said: ‘The vast majority of families continue to receive child benefit in full.’ The details of the policy will be kept under review, he added.