Specialist Tax News

Child benefit scares

The clawing back of child benefit in situations where one partner has an income of over £50,000 (in the current tax year) starts on 7 January 2013. Until then, there are plenty of scare stories doing the rounds; what is clear is that the system is likely to be an administrative nightmare if you find yourself caught in this trap.

HMRC admit that no fewer than 1.2 million families are likely to be affected, with no less than 500,000 expected to start having to file an income tax return. Remember, all of this is to merely claw back child benefit through the tax system. If either partner has an income of at least £60,000, there is no child benefit to enjoy. In cases where an income is between £50,000 and £60,000, a muted benefit applies.

Some commentators estimate that over 350,000 mothers who do not work could be hit further. Full time mothers receive national insurance credits towards their state pension as recognition of their responsibilities to care for children under 12. The worry is that, in cases where their partner earns an income of £60,000, these mothers will not claim their child benefit entitlement as it would be clawed back via the income tax bill. This would mean that they would not receive their national insurance credits. The Treasury has denied this, but it would be good to have this confirmed officially!

Leave a Reply