Budget 2012: Child Benefit Withdrawn For Earners Over £50,000 To Avoid 'Cliff Edge'

Posted: 21/03/2012 13:46 Updated: 21/03/2012 14:31

George Osborne

Child benefit will only be withdrawn if someone in the household earns over £50,000, the government announced today.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withdrawing child benefit all at once when people earn more than the higher rate threshold – the benefit will only be withdrawn when someone in the household has an income of more than £50,000," he said.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.

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@ guywalters : It's a #grandpatax as well you know

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@ joyless60 : #grannytax Dot Gibson gen sec of Nat pensioners convention 5m will be worse off. #bbcnewschannel Passionate advocate for pensioners

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@ eljmayes : The BBC's Norman Smith has just stated that his mum wouldn't be impressed by the supposed #GrannyTax- bias towards Labour?

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@ CallumJonesBlog : @BBCNormanS on Treasury's follow up to #grannytax: "my mum won't be happy with that argument"

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@ anthonypainter : The irony is that by leaking everything else, the Coalition has focused attention on the #grannytax ! Genius. #budget2012

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@ RicHolden : IoD: ‘This budget brings three items of good news for pensions’ http://t.co/gbouGq5y #Budget2012

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@ MirrorJames : Top Lib Dems distancing themselves from 50p - should try putting some yellow water between themselves and the #grannytax #Budget2012

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@ 1957AJB : Danny Alexander ashamed of #grannytax http://t.co/gjwtNPEQ And so he should be

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@ gordoh : Personal view: #grannytax fuss is overblown. Hits some but impact modest. Too many reactions verging on hyperbole. #budget2012

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@ faisalislam : Its not really a #grannytax though is it? The HMRC costing says 58% paid by male over-65s.

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@ AndrewPageCFP : RT @janemerrick23: Key about #grannytax Osborne has spectacularly failed Daily Mail Test by punishing readership: middle class pensioners

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@ AndrewPageCFP : RT @janemerrick23: Key about #grannytax Osborne has spectacularly failed Daily Mail Test by punishing readership: middle class pensioners

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@ Simon_Nixon : Stamp duty hike is in fact another disguised #grannytax since it will be ultimately be paid by home sellers in form of lower house prices.

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@ jamiesont : Osborne lucky the #grannytax didn't leak yesterday or The Queen would have shoved his smug face through that stained glass window.

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@ BBCNormanS : Age UK say pensioner with an income of 10500 pounds a year cd be 259 pounds a year worse off cos of #grannytax

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@ tom_watson : I'm distracted from #Budget2012 and #grannytax by news from a police station in Milton Keynes: http://t.co/P4uVL6x6

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@ SimonBatchelor1 : Anybody surprised the only bit of the #budget2012 not to leak was the #grannytax No thought not #bbcbudget

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@ martinnicholls : Osborne's #grannytax own-goal is surprising given the number of Tory voters it'll piss off. Unusually clumsy bit of politics #budget

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@ johnprescott : My latest #giveitbackdave #grannytax poster - made here http://t.co/xHDefEFw http://t.co/uSWBa9ux

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@ jamesrbuk : Am thinking @helenlewis is right. Someone should write a defence of the #grannytax in relation to intergenerational justice etc.

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@ RichardJMurphy : Gordon Brown had his 10p tax fiasco and his 75p pension rise. Osborn tries to do both with his #grannytax charge on all new pensioners

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@ martinnicholls : RT @edstaite: #grannytax is trending and not just with Lobby hacks. Osborne team need to hit back quick & hard #speedkills

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@ PatJHennessy : Why didn't the LibDems raise a fuss about the #grannytax ?

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@ chrisshipitv : 230,000 pensioners will be brought INTO paying income tax. 360,000 OAPs lose £285/year. Did Treasury not think controversial? #grannytax

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"It's about simplification, it was never going to be an easy decision but it had to be done at some point."

The source says the furore was expected and planned for, but they insist that simplifying the personal allowance is in the public interest.

But expected or not, 4.5 million pensioners are going to be affected and it's rapidly becoming the story of the day.

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@ FelicityParkes : I've just queued up with half a dozen people, all buying cigs like it was going out of fashion. Eat my smoke, Chancellor! #budget2012

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@ gavinshuker : George Osborne's #grannytax means 4.5m pensioners will lose out. £3bn squeezed from over 65s over the next four years.

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@ ShippersUnbound : Could the #grannytax be Osborne's 10p fiasco? Discuss...

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She tells HuffPost:

“This is an outrageous assault on decent middle-class pensioners.

“This Budget contains an enormous stealth tax for older people. Over the next five years, pensioners with an income of between £10,000 and £24,000 will be paying an extra £3 billion in tax while richer pensioners are left unaffected.

“There is nothing in this Budget for savers, there is nothing to improve the annuity market, nothing to appease the damage of quantitative easing and nothing to support ISA changes and shelter older people’s money in cash. This Budget is terrible news for pensioners.”

“It is good to hear that we will be able to harness the power of pension funds to improve UK Infrastructure but in short, this Budget is another shocking example of the Government’s attack on poorer and older people. It is dramatically unfair.”

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Filed by Dina Rickman  |