Child Benefit Cuts To Cost Some Families £50,000 According To PwC Research

Child Benefit Cuts 'To Cost Some Families £50,000'

Looming child benefit cuts are set to cost some families around £50,000 by the time their youngest child reaches adulthood.

Financial services firm PwC found the long-term cost of the cuts which come into force in the New Year will equate to more than a year's take home salary for many of those who stand to lose the benefit.

Analysts found that a family with two children faces missing out on nearly £40,000 over this period and suggested that parents may find themselves working for longer than they had expected to make up for the shortfall.

One million households are receiving letters from the UK tax authority next month, as families where at least one person earns more than £50,000 will have child benefit reduced or stopped from January.

Under the new rules, families where one parent earns between £50,000 and £60,000 will have their benefit reduced on a sliding scale, and stand to lose the benefit completely when a parent is earning over £60,000.

PwC's research looked at the total benefits that would have been received by a family from January 2013, when child benefit is withdrawn entirely for households where one person is earning £60,000 or more.

It calculated that a family with three children aged five, three and one in January would miss out on £50,684 worth of benefits.

Meanwhile, a family with two children aged three and one could lose out on £38,948.

The findings assumed that the benefits would increase in line with inflation, taking the Bank of England's 2% target rate into account.

Alex Henderson, tax partner at PwC, said: "Many people affected by the child benefit cuts have probably not considered what the true cost will be to them over time.

"Our projections show the cost could be substantial, and could ultimately mean many middle income families have to work longer until retirement or until they can pay back debts."

Child benefit currently stands at £20.30 a week for the first child and £13.40 for each subsequent child.

The changes have come in for criticism for being complex and throwing up anomalies, such as cases of two-earner households where both parents earn just below the £50,000 threshold. However, ministers say the new rules are needed to help the deficit reduction plan.

Work and Pensions Secretary Iain Duncan Smith recently sparked a furious backlash after suggesting parents should be paid child-related benefits for a maximum of two children, in a plan that could be introduced to new claimants from 2015.

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