Child Benefit and Credit Cards

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Hello. In today's Money Box podcast, why is credit card borrowing rising faster than it has in almost two years? Nearly one in four new cars sold last year was electric. We'll answer Moneybok listeners' questions about the plans for pay per mile charges, and the little known pension rule that could boost your pot by£720 a year.

But first, almost 15,000 families incorrectly lost their child benefit because the tax office wrongly believed they'd moved abroad. That's more than 60% of the cases where it was stopped. Despite HMRC telling MoneyBox in November, it was confident that the majority of suspensions were accurate.

The mistakes were made after travel data, like flights, was used to conclude families had permanently left the UK, but many of them had simply been on holiday. An earlier pilot of the scheme included employment checks, but those were scrapped when it was rolled out more widely.

The scale of errors has now been revealed in a written question raised in Parliament, where government figures show that of the cases HMRC has now actually closed, suspending the benefit was only correct for 6% of the families. Child benefit is worth at least a hundred pounds a month to parents. Back in November we spoke to Eve after her child benefit payments were wrongly suspended. She told us then about what it had meant for her.

I think it's about a hundred and five pounds a month I receive. So that could be a small amount to some people, but actually it's really helpful that money. And also I'm in between jobs at the moment. So this money is probably the most crucial time that I needed it. And I'm also annoyed that I have to justify going on a five day city break eighteen months ago. It just seems a bit ridiculous, doesn't it?

Well, after she spoke to Moneybox, she was able to confirm to the tax office that she hadn't moved abroad. Her child benefit was reinstated with a missing payment backdated. We caught up with Eve this week to get her reaction to these new numbers. who were wrongly suspended.

And at the time I remember thinking that that's probably incorrect and that it's probably a much higher proportion that they're incorrectly penalised. It doesn't surprise me at all that it's turned out that it's a much higher proportion of people who were penalised for actually not doing anything wrong. I do believe that some people probably have suffered of this, they've had to borrow money from friends or family, or it's caused them a lot of stress.

While Conservative MP for FILED Andrew Snowden asked the parliamentary question which revealed these latest statistics. Andrew, you've actually asked a number of questions around this issue in Parliament over the last few months. Why? Um as a as a constituency MP, we regularly obviously get lots of um our constituents getting in touch with us when they need our help.

Um and I'd had a number of inquiries last year from constituents who'd had um their benefits um suspended or they um knew of people, family members who'd had. So I did a bit of research, a bit of desktop research, and started to spot a there was a story in The Guardian and a few other bits and bats that were out there, but not very much. And I sent

the there was something greater or bigger going on here. So I started a series of written parliamentary questions, which for your listeners who who who aren't aware what they are, they are tabled questions that are published on the parliamentary website and the relevant government minister has to respond and their response is published. So it's a way of scrutinizing what's going on um in government and the civil service rather than having to example wait for the next

uh oral topical questions to come up um in the chamber. So the reason I did it was to try and understand the scale of the problem. But actually my initial concerns were, for example, around the G D P R implications of this, had the correct processes been followed, and it was only when I started to get some answers and then ask further questions.

questions that it tragically revealed the sheer scale um of the number of families that had been put in this distressing situation. Well let's let's talk about that scale because the the sh the figures show that when you look at the cases that HMRC has now actually closed, ninety four percent of those families shouldn't have had the benefit taken off them. Now Eve, we heard from wasn't surprised. Were you?

Um not by the time I'd got to the end of it. There seemed to be um a a quite distinct lack of transparency around this, which is usually an indication that there is something that um the civil service uh doesn't want to publish. Um and in the latest parliamentary written question um that I've put in an answer to that, there are still seven thousand seven hundred and eighty one cases.

um that have had those benefits suspended that haven't been adjudicated on. So there are still a lot of families out there um and people out there that are still going through this right now as we speak.

As as Eve said, you know, it's one hundred and five pounds a week, which to some people might not sound a lot of money, but if you are right on the breadline and you rely on this money, that that's one of your weekly shops you never can't afford. Perhaps not even for people who are on the breadline.

HMRC has apologised to those people who've had their child benefits suspended incorrectly and they've reintroduced those extra PAYE checks. So they've admitted the mistake and they've changed their process. Are you satisfied? I think I'm satisfied that they've acknowledged what went wrong in that. particular um case so those pay uh paye checks were removed, I think they said in in some of the answers to streamline the process.

Um, but the thing that's still hanging over all of this for me is how it had to take. a series of written parliamentary questions for myself and inquiries from other people to be able to shine a light on what had happened. So with them going to the select committee, HMRC will be at the select committee next week. And I'll be very interested to see how they answer questions about what they have learnt, not just about the individual P A Y E check.

But about the culture that enabled this to go on for so long without it being identified. Okay. Um and whether they're going to get someone independent or or or an organisation that's independent to come in and look at that culture and process to make sure that whatever it is next time, it might not be P A Y E next time that if issues like this crop up, they're quickly identified and dealt with um and that HMRC are transparent.

They are also now going to be writing to people first before suspending any payments and giving them a month to call or write back. So they they've updated the process there as well. And they they told us, HMRC says it estimates that two hundred and seventy million pounds of child benefit payments were incorrectly claimed last year. People moving overseas and not telling them is a big reason for that. So their intention here is to stop fraud.

Yes, and to be honest, the welfare system as a whole will require reform and change as it goes forward. We know that that bill is i i i is is unaffordable um in the long run with the with the treasury project projections that exist. But I think for your listeners and those who receive those benefits I think what they will want as any reforms and changes are made, that there is confidence that it is being done competently and efficiently and that any changes that go forward aren't going to leave

Eligible people, people that were at the end of the day, these are people who were eligible and needed those benefits out of pocket. We'll have to leave it there. Andrew Snowden, MP, thank you very much. And we will of course let listeners know what's said. uh in the Treasury Select Committee uh hearing uh come next week's programme.

Now, we heard this week that almost one in four new cars sold in 2025 was electric, a significant increase on the year before. But with that big change in cars comes a big change in how we tax them. In the November budget, the Chancellor Rachel Reeves announced plans to introduce new pay-per-mile taxes for EVs and hybrids.

A lot of MoneyBox listeners got in touch to ask how it would work, how the changes would be implemented, how the government would know how many miles drivers actually do, as well as this question from Ariella. I drive a hybrid car and I'd like to know, would I still be paying the full amount of road tax I pay now when these changes come in or will that be reduced to take account of the electric mileage charge?

Money box listeners always hungry to know the details. Well, our reporter, Dan Whitworth, is here to talk through some of the main points and answer some of those questions. Dan. Well the big changes that grabbed the headlines FLIS after the budget was that as from april twenty twenty eight. Electric car drivers will pay a road charge of three pence per mile while plug-in hybrid drivers will pay one and a half pence per mile and that'll go up with inflation every year.

Now to put that in some kind of context, an electric car driver clocking up eight and a half thousand miles a year would pay around two hundred and fifty-five pounds. That's roughly half the amount. petrol or diesel drivers pay in fuel duty for the same miles when they're filling up the pump. Now it'll apply to all UK registered EVs and plug-in hybrids

with mileage checked annually and that'll usually happen during an MOT. Okay, and that's still over two years off, but there are already more taxes being charged on electric cars. Yes, so other changes have already been put in place, including vehicle excise duty becoming payable on electric cars for the first time. That was as from April last year.

Uh for new cars the payment for the first year is ten pounds, then it rises to a standard rate of a hundred and ninety five pounds in the second year. And in London drivers of electric vehicles now have to pay the congestion charge since the start of this year. Okay. Well I mentioned one in four cars sold is now electric. What's the uh oh I'm sorry, what's the direction of travel?

Very good fliss. Uh so sales have been growing steadily over the last few years. Uh last year, just over four hundred and seventy three thousand battery powered models were registered, and that compares to three hundred and eighty two thousand the year before, so a huge big jump. And according to analysis by Zap Map, that's an electric charge mapper and data provider, there were around one point eight million fully electric cars on the UK roads, out of a total of around thirty four million.

Okay, thanks Dan. Well I'm joined now by Erin Baker, editorial director at Auto Trader. Erin, can you start by answering Ariella's question? Will she have to pay the same vehicle excise duty for her hybrid car, or will that be reduced to take into account the electric mileage charge?

Um, as Dan pointed out, the changes are still two years away at the moment and a consultation is taking place. So we can hope perhaps that someone from that consultation is listening to this programme and will take on board our thoughts. But as things stand Yes, I'm afraid Ariella will have to pay the same vehicle excise duty because

This pay per mile charge is not designed to replace vehicle excise duty. It's designed to replace the huge loss the government is going to face in fuel duty. And don't forget Rydwydwydwydwydwydwydwydwydwydwydwydwydwydwydwydwydwydwydwydwydwydwydwydwydwydwydwydwydwydwydwydwydwydwydwydwydwydwydwydwydwydwydwydwydwydwydwydwydwydwydwydwydwydwyr

Okay, let's rattle through as many questions as we can. Liam in Durham has been in touch to say people buy EVs because of incentives and lower running costs. And we do know of course a new electric car can be quite expensive. Uh Liam wants to know could removing those benefits now mean fewer people decide to buy one?

Well, yes, and I think there's a perception versus reality thing here. The reality is that electric cars, even with these changes, if you've got a home charger as sixty percent of us have the capacity to have.

electric cars are still going to be way cheaper to run and own than petrol cars. But the perception of the government whacking taxes on electric cars is potentially really damaging. I remember the Office for Budget Responsibility after the budget announced that they thought this would have a a hit of a hundred and thirty thousand fewer electric cars being sold because of this paper mile taxation. So we will see and we sh we should have some idea, by the way, in February.

um a as to the hit that that the electric car sales have taken because of this. It's interesting you mentioned home charging.'Cause the Treasury says that three billion pounds is being spent on UK manufacturing and charging infrastructure. Richard has messaged to say he lives in a block of flats so he can't charge at home. And he has to pay for more expensive charging.

Yeah, this is the big inequality still and I'm with all the listeners here who think, Well, hang on a second, it's all very well and good. If I can pay uh to charge at home with five percent VAT on domestic energy, whereas public charging is so much more expensive because it's twenty percent.

uh VAT on public energy. So we really do need to continue efforts to get the government to lower that VAT on public energy to bring the cost of public charging down. You can't have the case that those that tend to be the wealthier with driveways, with big houses, get the cheaper charging than those who lives in live in flats or rent or live in the city centres.

Well Chris from Gloucester thinks that asking electric drivers to pay a lump sum one off road charge based in mileage instead of kind of paying a bit of tax every time they fill up, that could be hard for some people. Yeah, and I think this is a genius point. So well done to him for making it. Um and I hope that this can be put to the government during the consultation period, which is that there there ought to be a way for people to spread the cost of this.

What people are going to have to do with pay per mile is estimate in advance how many miles they think they are going to cover in the year and pay up front. Then that mileage will be checked at the MOT. If they've overestimated and they've done fewer miles,

the the spare cash, as it were, that they've paid up front will simply be carried forward to the following year. If they've underestimated the mileage they've done, they'll have to make up the shortfall then and there. Thank you. Well Erin you mentioned uh the consultation the government is Carrying out that consultation until March. Erin Baker from Auto Trader. Thank you very much. Dan is still here. Dan, what has the Treasury had to say about this?

Well the government told us that EV drivers pay no fuel duty whilst petrol drivers typically pay around four hundred and eighty pounds a year. It says that's not fair and that under this new system EVs will pay half the duty of petrol cars. Making it still the cheaper and greener choice. Du, jag skulle ju köpa några nya palstrält i lagret, det kanske blev lite mer grejer. De hade ju allt, skribord, jag köpte en sån här, och kontorstolar, och så hade de en skitsnygg till.

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Thank you very much.

Now, did you reach for your credit card in the run-up to Christmas? Certainly some people did. Credit card borrowing accelerated at the fastest annual rate for almost two years in November. The new data from the Bank of England shows that outstanding credit card balances reached nearly£78 billion.

Now that might of course mean more people are struggling to keep up with their bills, but it could also mean more are simply using credit cards for the potential benefits like managing spending and boosting their credit score. Our reporter, Joe Krasner, has been to speak to shoppers informed. got a number of credit cards. I'm not

spending anything on them at the moment and trying to pay them off. I'm very concerned. It's a necessity sometimes to actually use them. So why did you get a credit card? Um initially to help my with my credit score. And then it just

like you get into yourself into a cycle and it's hard to get out of that cycle once you're in it. You do become reliant on it, trying to pay it off and thinking well, do I pay the credit card or do I buy food or heated? Yes I do have the credit card. I use it all the time. It's

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So I don't go into into debt? Yes, I have a credit card. I can't do without it to tell you the truth. I do think they're marvellous to have. So did you use your credit card a lot over November? I did, yes. Yes, I use it a lot. So we tend to use it as Rwy'n gwneud gwneud gwneud gwneud gwneud gwneud gwneud gwneud gwneud gwneud gwneud gwneud gwneud gwneud gwneud gwneud gwneud gwneud gwneud gwneud gwneud gwneud gwneud gwneud gwneud gwneud gwneud gwneud gwneud gwneud gwneud gwneud gwneud

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Well, Sam Miley is from the Center for Economics and Business Research, a consultancy that works with major supermarkets and well-known brands on economic forecasting samples. When you hear that credit card borrowing is rising so fast, does that automatically mean that households are struggling and getting into debt? So when consumer credit use is rising, there are a number of different possible interpretations.

Um so on the one hand it can be a sign of of confidence in the economy, um, but on the other hand there are clear signs that credit um can help to support households' incomes when they're struggling to make ends meet and I think on the balance of current economic conditions

The latter of those is the the more likely driver of the recent uptick. Trevor Burrus Because also lower interest rates are making borrowing cheaper generally though, aren't they? We've seen rates falling on mortgages. Has that been happening with credit cards? Sure. So the Bank of England has been cutting interest rates for some time and that has passed through to a number of consumer products, um mortgages as you say, and also um personal loans.

But that isn't quite the case for credit cards. The effective interest rates are as high now as they were a year ago when the base rate was higher. And so it's still um uh quite an expensive form of of credit. Hm. But uh w people will be thinking, this was in the weeks before Christmas. These are the November numbers. Some listeners will be thinking, well, hang on. Couldn't this rise be explained by more demand for borrowing for things like presents?

So I think consumers would have been more likely to to take up credit to fund their festive spending. But I think it's important to acknowledge that the the data tend to be adjusted for seasonality and so um th there's no specific effect from um from festive spending um explaining the the increase

Year on year. It can't just be Christmas. Um let's talk about inflation then. The the rate of inflation is slowing. Food costs were still quite h are still quite high, aren't they? And one woman in FormBee was talking there about buying food on credit. Sure. So inflation, although it is slowing, is significantly elevated. Um the most recent data showed um three point two percent on the CPI metric, which is far above target.

And one of the main drivers of inflation at the moment is food and beverages. Which of are of course essential spending categories. So it is quite a concern that people are reaching to um credit in order to in order to fund their essentials. Mm-hmm. And you produce an income tracker for Asda, don't you, which looks at earning and spending What does that show for November?

Sure, so the income tracker for ASDA is uh a metric of spending power and that has shown quite steady gains in recent months, um, driven by quite strong earnings growth. But the rate of increase has started slowing quite sharply recently, which is primarily a a result of that elevated inflation rate. And although um spending power has been increasing, I do think it's important to flag that

spending power is still down in real terms relative to prior to the cost of living crisis. So consumers are still really feeling the pinch. Is it is it increasing for people on lower incomes as well? So lower income groups are amongst the the most affected by by the cost of living crisis. by definition of them being lower income, but also due to the concentration of their spending in categories that I've seen quite

high inflation recently. So um there is clear um divergence between lower income groups and their higher income counterparts. Not least in the absolute spending power, but also in the the rate of increase. According to a recent report from the Money Charity, the average owed on credit cards by a UK adult in October was almost fourteen hundred pounds. And it says if you only made the minimum repayments it would take over twenty seven years on average to pay off. And of course

You'd pay a fortune in interest as well. Credit cards, as you've said, can be quite expensive. What can we expect in twenty twenty six? Well, I think we will have um still elevated demand for for credits as a result of the continuation of um various um headwinds facing consumers. Um so first of all, inflation is expected to be um elevated above target for some time. So

um curtailing consumer spending power and ultimately um encouraging demand for external sources of funds like credit. In a word then, uh w if people are worried about debt, where can they look for Um I'm I'm not personally a a debt advisor, um, but uh I I think you can you can point um consumers to charities, um, organisations like Step Chains.

And generally uh seeking advice for any financial issues they may have. Do seek advice. Sam Miley from the Centre for Economics and Business Research. Thank you. And Uh yes, if you do need advice on dealing with debt, we had a special money box live on the topic just before Christmas. That's on BBC Sounds, and there are details of organizations offering help and support with debt. Hardship or homelessness if you go to bbc.co.uk forward slash action line.

Now we've just got time for a quick Money Box mini on a pension rule that could let you claim an extra£720 a year in free pension cash. Dan is back to tell us more. Dan, there is sadly always a catch when we talk about free money. Who's this for? Yeah, free money. Uh so this is about a pension rule. They can help anyone who's aged under 75 and lives in the UK, even if they're not working or are working but not earning enough to pay income tax. The way it works.

is that someone can pay into their own private pension scheme and the government, well, they'll automatically top it up by 25%. They may be able to fund the pension contribution if they have savings of their own, or their partner or a relative can also pay the money as well. Just to give an example. If someone is taking time out of work unpaid To raise children, for example.

Their partner can invest up to two thousand eight hundred and eighty pounds a year in contributions to their personal pension. The scheme provider then claims seven hundred and twenty pounds from HMRC, so three thousand six hundred pounds in total goes into that pension. And do people actually know about this? Well Octopus Money, that's a financial advice company, did some research on this in regard to parents.

Now that research suggested around two-thirds don't know about it. Also, that over 30 years, just one year's worth of that£720 top-up could grow to more than£3,000 through compound interest returns. Now we do know when it comes to pensions there can be a lot of confusion, so it's definitely worth looking at if you think you could benefit.

Get in touch with your pension provider and there's also lots more information on gov.uk. Just search private pension contributions, look at the section on tax relationship. Dan, thank you. Lots of you getting in touch with your questions about EVs. Uh, like Elizabeth who says, what about new cars that for the first three years are exempt from MOTs? How will they be monitored for the new charges? We will come back to this topic very soon in a future podcast.

Now in Wednesday's Money Box Live podcast we're talking about inheritance tax. We get loads of questions on this topic from changes to tax on pension pots to selling homes to pay care fees. Get in touch with what you want to know. And we'd particularly like your voice notes for this one. You can send them to us on WhatsApp. The number is 0306. seven eight three one eight three or you can email moneybox at bbc.co.uk. Include a phone number if you can.

In this podcast, the reporters were Dan Whitworth and Joe Krasner, the researcher Emma Devlin, the studio manager Paul Lewis, our editor is Jess Quayle, I'm Felicity Hannah, and this was a BBC News Money and Work Production for BBC Sounds.

Hello, Alex von Tunzelmann here with a brand new series of History's Heroes. People with purpose, brave ideas, and the courage to stand alone. Including the little-known story of a famous author caught up in a horrific Dickens remained in the river, helping the rescue, assisting wounded. He didn't search out to be heroic. He didn't play on his heroism. Subscribe to History's Heroes on BBC Sounds.

Där vi just nu har extremt låga priser på frukt och grön, vad sägs som kvistomater för bara 29-90 kg eller jordgubbar 400 gram för så l39, mer för pengarna på Liden. Det lönar sig. Amazon presenterar Simon och Kans dejingnerver. Under miljontals år har djur utvecklat sofistikerade paningsritualer. Fåglar dansar, varja rylar och pinger fria med stenen.

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