The Child Benefit tax charge pain begins to hit


Date: 28 January 2014

The Child Benefit tax charge pain begins to hit/father and son holding had in handThis time last year I raised serious concerns about the Child Benefit tax charge which was introduced on 7th January 2013.

Well it seems that I may have been right that this ridiculous system, which was brought in to try to stop benefits being paid to higher earners, was bound to cause a heap of problems.

I've just heard of a case of an "estranged spouse" who, having separated from his wife several months ago, is less than happy to find that he has been slapped with a tax charge for the Child Benefit that his partner received in the previous tax year when they were still living together. He may not realise that he will have another tax charge from the start of this tax year up to the date when he separated from his wife. And that's whether or not he knew at the time that she was in receipt of Child Benefit.

A message to all those separating from their spouse or partner – make sure that you sort out who forks out for the Child Benefit tax charge in your financial divvy up. Remember that the charge will be applied in your self-assessment which is completed several months after the end of the tax year and therefore many months after your date of separation. The charge is applied to the higher earner regardless of whether they themselves actually received the Child Benefit.

How ill conceived (excuse the pun!) is this Child Benefit tax charge?

Whilst the objective may have been good the execution really does leave a lot to be desired. Not every couple chooses to share all their financial information at the best of times. For separating couples this may well be another (hidden) cost of divorce.

Using 20 years' experience spent working at some of the UK's leading businesses, award-winning chartered accountant Elaine Clark is the founder and managing director of Elaine is a regular contributor to BBC's Money Box Live.

More information can be found on the HMRC website.

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