Child Benefit Clawback

There was mention at Budget time in March of “child benefit”  being clawed back by a tax charge where one of a couple living together has income over £50,000pa – fair enough you may say.

But the detail which has emerged after passage of the Finance Act in July may seem less reasonable to some family units, in particular couples “living together as if “ they were married or in civil partnerships. The principles of independent taxation of married couples /civil partners, let alone independent people living together, seems to have been forgotten, not to mention sensitive data protection.

Apparently HMRC will be writing this autumn to everyone on PAYE whose earnings are over £50,000 to warn about the potential tax charge, as they cannot easily identify the other partner of a couple living together, and their tax status alone or combined.

Basically they have to identify the partner who has the higher income, as only the individual with the highest income is liable for the tax. HMRC may have to rely on the happy couple comparing their financial / tax status to establish this when preparing their individual tax returns, or may invite people to phone HMRC to check their partner’s income level – a breach of data protection you might say?

For those who have been claiming child benefit for some years, and where one partner will clearly be over the £50,000 limit,  it may simply be a case of electing not to claim it in future. It will be much trickier for those near the borderline, and in particular the self-employed whose incomes fluctuate

The law and practice referred to in this article or webinar has been paraphrased or summarised. It might not be up-to-date with changes in the law and we do not guarantee the accuracy of any information provided at the time of reading. It should not be construed or relied upon as legal advice in relation to a specific set of circumstances.

The Legal 500 - The Clients Guide to Law Firms

UK Chambers logo

Best Companies - One to watch logo

Cyber Essentials Certification Logo