Middle income parents spared from burdensome tax returns under shake up from Rachel Reeves next week

22 March 2025, 07:42

By Natasha Clark

@NatashaC

Parents on middle incomes won’t have to fill out tax returns under a new shake-up coming in next week’s spring statement.

LBC can reveal the Treasury is planning to unveil a new digital service to spare thousands of working parents from having to fill out burdensome paperwork.

At the moment, those who are hit by the high-income benefit charge have to submit a tax return every year to HMRC – but this will be binned by the summer.

They’ll be able to pay the charge through their payslips instead.

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The high income benefit charge hits parents who claim child benefit when they earn between £60,000 and £80,000 a year.

The Chancellor, Rachel Reeves, told LBC: “We are taking action to make life easier for working parents.

“By giving them the choice to pay the tax charge through PAYE, we're making our tax system simpler for busy families, reducing the risk of them being penalised for not filing a tax return and supporting growth and productivity across the UK.”

Child benefit – currently worth £25.60 a week, or £1,321 a year for the first child – is also being raised by 7 per cent from April under current plans.

That will take it up to £26.05 per week for the eldest child, and £17.25 for other children, from next month.

It comes after LBC revealed earlier this month that dog walkers and those who have a side hussle like selling clothes on Vinted will also find it easier to pay their taxes in future

The Treasury will change the rules to raise the threshold that they have to fill out a return for, taking thousands of Brits out of having to fill out the hated returns at all.

The spring statement will be laid out by the Chancellor on Wednesday, but there’s not expected to be big tax and spend changes in there.

LBC understands the Chancellor’s made up her mind not to raise taxes this week.

It comes after worse than expected public borrowing figures yesterday piled pressure on the Chancellor again in the run up to the fiscal event.

The UK government borrowing rose by more than expected last month to £10.7billion – around £4billion more than was predicted – wiping out any headroom she may have had.

The Institute for Fiscal Studies warned the Chancellor was “boxed in” by her fiscal rules, and promised not to raise taxes further, or return to austerity for public finances.

She’s repeatedly insisted her promises to not borrow for funding day-to-day public spending and to get debt falling as a share of the UK economy by 2029-30 - are "non-negotiable".

Labour MPs have been piling pressure on her to rip them up rather than slash budgets.

But ministers are concerned that the squeeze on the finances is likely to mean even greater cuts to Whitehall departments when the spending review comes around later this year.

Updated forecasts on the economy will be delivered from the Office of Budget Responsibility and the Chancellor next week.

They’re predicted to show that she will break her fiscal rules without intervening – forcing her to find the cash urgently to plug a hold.

Stubbornly high inflation, and sluggish economic growth forecasts are also expected next week.

Growth forecasts are expected to half the UK’s forecast rate from 2 per cent in 2025, to around one per cent, according to some reports.