Child benefit will only be withdrawn if someone in the household earns over £50,000, the government announced today.
In his 2012 Budget Chancellor George Osborne said he wanted to avoid a "cliff-edge that means people lose all their Child Benefit when they earn just a pound more."
"So I can today confirm that instead of withdrawing child benefit all at once when people earn more than the higher rate threshold – the benefit will only be withdrawn when someone in the household has an income of more than £50,000," he said.
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"And the withdrawal will be gradual, 1% of child benefit for every extra £100 earned over £50,000 so there is no cliff-edge, and only those with an income of more than £60,000 lose all their child benefit."
The move is expected to help an extra 750,000 keep all or some of their child benefit. Nine out of 10 of families are still eligible for child benefit.
It comes after months of reports that Treasury officials were looking at raising the eligibility cut-off point amid fears of a backlash from middle-class voters.
Labour has also attempted to ramp up pressure on the issue by using an Opposition day debate in the House of Commons earlier this month to call for an urgent review of the reforms.
21/03/2012 17:37 GMT
Should it be #grandpatax instead of #grannytax?
@ guywalters :
It's a #grandpatax as well you know
21/03/2012 17:31 GMT
5m set to lose out over #grannytax
@ joyless60 :
#grannytax Dot Gibson gen sec of Nat pensioners convention 5m will be worse off. #bbcnewschannel
Passionate advocate for pensioners
21/03/2012 17:27 GMT
Were @BBCNormanS's comments on the #grannytax a sign of BBC impartiality?
@ eljmayes :
The BBC's Norman Smith has just stated that his mum wouldn't be impressed by the supposed #GrannyTax- bias towards Labour?
21/03/2012 17:24 GMT
@BBCNormanS gets personal on the #grannytax
@ CallumJonesBlog :
@BBCNormanS on Treasury's follow up to #grannytax: "my mum won't be happy with that argument"
21/03/2012 17:22 GMT
If Osborne hadn't leaked - would #grannytax be so talked about?
@ anthonypainter :
The irony is that by leaking everything else, the Coalition has focused attention on the #grannytax ! Genius. #budget2012
21/03/2012 17:19 GMT
CCHQ bring in help for defence over #grannytax
@ RicHolden :
IoD: ‘This budget brings three items of good news for pensions’ http://t.co/gbouGq5y #Budget2012
21/03/2012 17:09 GMT
Should the LibDems put "yellow water" between themselves and the Tories on #grannytax?
@ MirrorJames :
Top Lib Dems distancing themselves from 50p - should try putting some yellow water between themselves and the #grannytax #Budget2012
21/03/2012 17:03 GMT
Is Danny Alexander ashamed of the #grannytax?
@ 1957AJB :
Danny Alexander ashamed of #grannytax http://t.co/gjwtNPEQ And so he should be
21/03/2012 17:02 GMT
Is the #grannytax fuss overblown?
@ gordoh :
Personal view: #grannytax fuss is overblown. Hits some but impact modest. Too many reactions verging on hyperbole. #budget2012
21/03/2012 16:59 GMT
Is the #grannytax actually what it says?
@ faisalislam :
Its not really a #grannytax though is it? The HMRC costing says 58% paid by male over-65s.