Working parents face 90pc tax rates in new child benefit trap

£50,000 was 102 per cent, meaning they were losing money on every £1 earned after accounting for benefit clawbacks.

The move to raise the child benefit ceiling to £60,000 means 170,000 additional families now keep their benefits in full. The Treasury estimates it will save nearly half a million families with children an average of around £1,300 next year.

The Office for Budget Responsibility (OBR), the Government’s tax and spending watchdog, believes raising the HICBC threshold would add the equivalent

A single parent earning £13,000 with two children will lose 67.6p in every pound earned above the tax-free personal allowance of £12,570, according to Policy in Practice.

Campaigners warned that this meant work did not pay for many, keeping low earners reliant on benefits.

Edward Davies, policy director at the Centre for Social Justice think tank, said: “This budget has given those who our society and economy need most to make more of their lives the least opportunity to do so.

“We believe that making sure people are always better off working should be one of the Government’s absolute top priorities. It is true that under the old benefit system some marginal tax rates were as high as 96 per cent, so Universal Credit has been a huge shift in the right direction for a very large number of people.

“But the job is certainly not done, as the spiralling rate of economic inactivity testifies.”

Mr Hunt also did not use his Budget to address the punishing tax rates faced by parents earning over £100,000.

Free and tax-free childcare is withdrawn from high-earners once they cross this pay threshold, meaning a parent in London with three children earning £140,000 could be worse off than someone earning £99,000.

A Treasury spokesman said: “We are focused on creating a tax and benefit system that ensures it always pays to work.

“Which is why we have cut National Insurance by a third, an extra £900 a year for the average worker, and have raised the threshold for the High Income Child Benefit Charge to £60,000.”