Impact of Coronavirus on child benefit and tax-free childcare

May 28, 2020


Read time: 3 minutes

By Lyndsey Hall


If you were expecting a baby boom in the year following the coronavirus pandemic and lockdown, you might be surprised. Research has suggested that the levels of uncertainty and worry, as well as the growing rate of unemployment, caused by COVID-19 make a baby boom highly unlikely.

According to scientists, small storms and lesser natural disasters can often result in an uptick in births nine months later, but major disasters usually cause birth rates to decrease instead. In an article for the Institute of Family Studies in March, Lyman Stone wrote: “Events that cause a large increase in deaths tend to cause a large decrease in births nine months later.”

Whether you are planning to grow your family or not, you might want to consider how the current situation and any drop or increase in income could effect your child benefit entitlement and whether the High-Income Child Benefit Charge applies to you right now.

Coronavirus impact on the High-Income Child Benefit Charge

With many employees and the self-employed being furloughed, being made redundant, or making lower profits, your income for 2020/21 may well fall below the £50,000 limit at which child benefit starts being taxed.

The charge is 1% for every £100 that adjusted net income exceeds £50,000, multiplied by the child benefit claimed in respect of the children.

Note that the rate of Child benefit increased from 6 April to £21.05 a week for the eldest child and £13.95 for each additional child.

Many couples with one income over £60,000, the amount at which the benefit is fully-taxed, stopped claiming Child Benefit rather than have to repay it back in tax. You can therefore reinstate your claims if the income of the higher paid taxpayer could drop back below £60,000.

Relaxation of tax-free childcare and 30 hours criteria

The government has also relaxed the eligibility criteria for tax-free childcare and 30 hours free childcare to support working parents during the ongoing pandemic. If you are applying for, or already receiving, tax-free childcare or 30 hours free childcare, then you will remain eligible even if your earnings have fallen below the normal minimum income as a result of coronavirus. This also applies if you’re self employed and your income has fallen, but you would normally expect to earn above the minimum earnings requirement after lockdown.

Time spent on sick pay or SSP will count as working and meeting the minimum income requirement, as will unpaid leave taken to care for others, such as children, during the pandemic, if you expect your income to meet the minimum after coronavirus.

Critical workers who may have exceeded the maximum income threshold of £100,000 per year because of increased hours as a direct result of coronavirus will also still be eligible.

In addition, if you’re a critical worker and missed the 31 March deadline for application or reconfirmation then your local authority may be able to extend the validity date on your 30 hours code.

Redundancy and your entitlement to tax-free childcare

If you’ve been made redundant you won’t be eligible to apply or reconfirm a childcare account, but you can reapply 31 days before starting a new job if you expect to earn above the threshold. And anyone who was getting tax-free childcare and is now claiming universal credit cannot apply or reconfirm, but you can apply for 30 hours free childcare if you meet the revised minimum income requirement, or would expect to normally.

Have you considered how the current pandemic could impact on your child benefit entitlement? Or whether you’re still entitled to tax-free childcare or 30 hours free childcare? Get in touch if you’d like some tailored advice on your individual circumstances.

Related articles:

Royal Baby Boom

High Income Child Benefit Charge and the State Pension

Tax planning to minimise the HICBC


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