Page 25 - Budget Newsletter - March 2023

Although not mentioned in the Budget technical material, it is assumed that the current exclusion
from free childcare that applies when one or both parents have adjusted net income of over
£100,000 a year will remain in force.

In a parallel (and more rapid) move, there will be significant improvements to the childcare amounts
payable as part of Universal Credit (UC). From April 2023, the maximum childcare amount for one
child increases from the previously announced £646.35 a month to £951. For two or more children,
the maximum rises from £1,108.04 to £1,630. For parents who either move into work or wish to
increase their working hours, the UC childcare payments will be paid upfront rather than in arrears,
as applies at present.

Child benefit

The High Income Child Benefit Tax Charge – the child benefit tax – means that if you or your partner
has income of £60,000 or more in the current tax year there will be a tax charge equal to your total
child benefit unless you have taken a decision to stop benefit payments.

Between £50,000 and £60,000 of income, the tax charge is 1% of benefit for each £100 of income
above £50,000 – a threshold in 2023/24 (and through to 2027/28) that is below the starting point for
higher rate tax (other than in Scotland). The result can be high marginal rates of tax in the £50,000 -
£60,000 income band. If you have three children eligible for child benefit, the marginal rate is over
69% (71% in Scotland).

Planning Points

As the High Income Child Benefit Tax Charge is based on taxable income, you could reduce the
impact of the tax by making a pension contribution.

Junior ISAs

JISAs were launched in November 2011 with an annual investment limit of £3,600, which has since
been increased to £4,368 in 2019/20. For 2020/21 the limit was more than doubled to £9,000, a
ceiling that will continue to apply for 2023/24. JISAs can be invested in cash deposits and/or stocks
and shares in any proportion and can usually be arranged for any child aged under 18 who was born
before 1 September 2002 or after 2 January 2011. A child cannot have both a JISA and a CTF account

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