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Osborne defends Child Benefit anomaly

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Child Benefit will be withdrawn by 2013 from households containing at least one higher rate taxpayer, the Chancellor announced.

The BBC reported on 5 October, as the decision drew widespread criticism, that according to Government sources a tax break for married couples will be introduced in the current Parliament.

HMRC will implement the Child Benefit change through the existing PAYE and self assessment structures, the Treasury said. Just over a million households receive Child Benefit and contain at least one higher rate taxpayer. Claimants receive £20.30 per week for their eldest child, and £13.40 per week for each other child.

Withdrawing Child Benefit for higher rate taxpayers will save approximately £1bn per year. The Government said it would set out detailed plans at the spending review, and legislate for the measure in the next Finance Bill.

George Osborne told the BBC’s Today programme on 4 October that the tax system would be used to take ‘the equivalent amount’ from higher rate taxpayers.

He accepted that a couple earning £40,000 each would still receive Child Benefit, whereas a household with one worker earning £50,000 would not.

The alternative would be a ‘very complicated means test’, he suggested.

Tax returns will include a box asking whether someone in the family has claimed Child Benefit. ‘I hope higher rate taxpayers will do the sensible thing and stop claiming Child Benefit so that we don’t have to take it back through the tax system,’ Osborne said.