Money Wellness
Image of a parent lay on the floor with a child on top of them playing a game
category iconbenefits
calendar icon04 Sep 2023

Separated parents warned about child benefit tax trap

Separated parents have been warned to check whose name their child benefit is registered in or face being clobbered with a hefty tax bill.

The warning from the Low Incomes Tax Reform Group (LITRG) comes following a recent tribunal where a parent was found liable to pay high income child benefit charges (HICBC) even though they didn’t receive the benefit and it was paid directly to their ex-partner.

The problem occurs because child benefit is claimed by an individual and not a couple. Therefore, the person who completes and signs the form to make the claim – even if they choose for their partner to receive the benefit – is deemed as the claimant.

If a couple goes on to separate and the income of the person listed on the application grows to more than £50,000, they will automatically be liable to pay the higher charges. It’s even possible that any new partners might also become liable for HICBC too even though they had nothing to do with the original claim.

According to LITRG it’s not as simple as just changing names to avoid paying the charges. If you’ve separated and find you’re affected by this, you’ll have to end your claim for child benefit and ask your ex-partner to make a new claim.

Tom Henderson, LITRG Technical Officer, said: “When making a child benefit claim, it might feel like it doesn’t matter which person fills in the form – but it does. The claimant is the person responsible for keeping the claim up to date and is the person liable to repay the benefit if it is overpaid.

“We would encourage everyone with children for whom child benefit is being paid – especially separated couples – to check they are aware of who the claimant is and what the consequences of that claim are.”

Anyone who’s found to be liable for HICB but haven’t told HRMC could also be charged penalties.

Avatar of Caroline Chell

Caroline Chell

Caroline has worked in financial communications for more than 10 years, writing content on subjects such as pensions, mortgages, loans and credit cards, as well as stockbroking and investment advice.

Related posts

benefits

12 Apr 2024

Scotland moves to child disability payment- what’s changed?

Find out if you need to apply for child disability payment.

benefits

11 Apr 2024

Working parents on universal credit to get significant boost in childcare support

The DWP has confirmed that parents on universal credit can now get up to £1,311 more a year in childcare support following the 6.7% rate rise happening this week.

benefits

10 Apr 2024

Benefits for new parents rise- how much will you get?

Benefits for parents with newborns rise to an extra £604 a year. Here's where you can get help with buying items for your newborn.

benefits

10 Apr 2024

Millions over 50 at risk of poverty in retirement

92% of over 50s who don't have private pension savings are worried about their finances. Find out if you're eligible for pension credit or other benefits.