Biggest Budget winners revealed – it’s good news if you’re a couple both on £60k with kids

Middle income earners with children have been the Budget’s biggest winners after the Chancellor made sweeping changes to the way child benefit is paid, data suggests.

Jeremy Hunt confirmed the widely-trailed 2p cut to National Insurance, while the big rabbit out of the hat was raising the child benefit threshold to £60,000.

A couple with two or more children where each partner earns £60,000 a year will have the biggest boost to their take-home pay, as they receive the maximum NI boost and can now claim child benefit in full.

We explain how much parents are set to save this year with the double whammy of tax cuts, and who won’t benefit from this week’s Budget.

Working parents earning over £60,000 a year each were the biggest winners from the Budget

What do the changes mean for parents?

Jeremy Hunt announced another cut to National Insurance contributions (NICs) from 10 per cent to 8 per cent, just two months after another 2p cut took effect in January.

Another cut to NICs means workers will see another small rise in their monthly take-home pay, with a near £450 a year boost for an average earner on £35,000.

However those earning more than the higher-rate threshold of £50,270 will make the biggest saving, according to AJ Bell’s analysis.

Their NI contributions will fall by £754 a year from April, which combined with savings that came into effect in January, will increase to £1,508 per person.

A working couple both earning £50,270 or more it is doubled to a £3,016 saving for the household.

Hunt also announced changes to the high income child benefit charge, which has been widely criticised since it was introduced in 2013.

From April, the threshold at which it is paid back from £50,000 to £60,000, while the threshold at which it is withdrawn will increase to £80,000.

Hunt also said that by 2026 the system will change to assessing household income in an attempt to mitigate the controversial tax trap.

> What the Budget means for you – plus use our tax calculator 

The changes mean that a parent earning £60,000 will be allowed to claim full child benefit which from April will be £25.60 a week for one child, and £16.95 for subsequent children.

Someone previously not able to claim because of the high income child benefit charge will now be able to in full, equating to an extra £2,212.60 a year for two children, or £3,094 for parents with three children.

However the changes merely push the threshold higher and do little to change the marginal tax rates that now face those earning £80,000.

Figures from the Institute of Fiscal Studies (IFS) show that parents with three children will face a marginal tax rate of just under 60 per cent, while those with one will pay 50 per cent.

Parents earning £80,000 will still face high marginal tax rates despite changes to the threshold

How much will parents save after the Budget?

The combined impact of both NIC cuts and changes to child benefit means a couple earning £60,000 with two children will save £5,229 a year – or £435.75 a month –  while a couple with three children get an extra £6,110 a year.

A single earner on £60,000 with two children will save £3,721 a year, or £318.42 a month.

Those earning under £60,000 will see a marginal tax cut in the form of NICs but they already receive full child benefit so will see no uplift there.  

Similarly, those with two children earning between £80,000 and £100,000 will receive £3,016 more a year because they are receiving the full NI saving but not child benefit.

See the table below for the full breakdown of what working parents will save this year.  

Source: AJ Bell. Based on the combined impact of both NI cuts and the lifting of the threshold for the Child Benefit High Income charge.

Once a couple is earning over £100,000 eligibility for tax-free childcare is removed, and so is some entitlement to publicly-funded nursery places. 

This can mean that a parent with two children can be better off earning £99,999 and keeping their tax-free childcare, than if they were earning over £100,000.

Laura Suter, director of personal finance at AJ Bell said: ‘Clearly these figures can’t be taken in isolation: they come with a backdrop of frozen income tax bands, a huge increase in personal taxation and rising prices that outpace much of the handouts made at the Budget. 

‘Parents only have to glance at their childcare bills to see how much of these gains will be eaten up by that one rising cost alone. But regardless, the boost to working parents’ household budgets is significant and far better than if no changes were made at the Budget.’

Who lost out in the Budget?

While some parents might be cheering the changes, Hunt has received criticism for doing nothing for pensioners.

Those over state pension age will get no benefit from the changes to NI because it’s a tax on earned income and is paid by employees and self-employed workers.

Suter said: ‘While the majority of these people won’t be paying for their children anymore, they have still faced a sizeable increase in costs from energy bills to food shopping to rent. They get no benefit from the changes to National Insurance, as it’s not paid by those over State Pension age. 

‘Very few will benefit from the child benefit changes as it’s only paid up until the child is age 16 or until they are 20 if they are in education or training.’

Toby Tallon, tax partner at Evelyn Partners said: ‘By doubling down on his Autumn Statement NIC cut, Hunt is favouring younger cohorts over older, with those over state pension age not subject to NI at all. 

‘As it also has no benefit to those earning income from other sources or being taxed on their assets, it does mean there is little to celebrate for the older constituency that Conservative Chancellors have traditionally courted.’

However in the Autumn Statement, the Chancellor confirmed that pensioners will see their state pension rise by 8.5 per cent thanks to the triple lock. The new state pension will rise to £221.20 per week from April.

Suter said: ‘The state pension has risen by just shy of £1,900 over the past two years so pensioners can’t claim to have received nothing from the selection on Hunt’s dessert trolley of handouts.’

This post first appeared on Dailymail.co.uk