Why Child Benefit Tax Charge changes are unfair

The changes to the Child Benefit Tax Charge have some grey areas, making them unfair

The changes to the Child Benefit Tax Charge have some grey areas, making them unfair

Today George Osborne’s changes to the Child Benefit Tax Charge come into force. AAT’s Director of Professional Development, Adam Harper, explains why the changes are unfair and how they will place an administrative burden on more taxpayers

The changes to the Child Benefit Tax Charge are naturally causing concern for many households nationwide and many will think it an unwise move three quarters of the way through a tax year.

Unfortunately, as a result it is going to bring into the Self Assessment regime a significant number of taxpayers who previously did not file returns. This will put pressure on the filing system conceivably.

Some individuals earning within the bracket of £50,000- £60,000 that want to keep receiving the child benefit, but are not registered under Self Assessment, will of course incur administration charges. There are a large majority of people that are likely to be affected by the changes but have not been contacted by HMRC yet.

Further complications will occur when these individuals are hit by penalties for failure to file a Self Assessment return if themselves or their partner are earning over the £50,000 mark.

This tax is aimed at the highest earner in which there are two earning partners living under one roof. There are also many practical questions being asked about what constitutes a partnership and what about those partners that live apart or separately on occasion.  The government is trying to address those grey areas but at present it’s causing debate.

The major unfairness in the system is that two partners under one roof that both earn £49,000 can still receive the full child benefit with no erosion. While one earner in the next house can earn £60,000 and they will receive no child benefit at all. This seems to be embedded into the system and it an inequitable unfair result which is unlikely to change.

Want to know more about the Child Benefit Tax Charge? Accounting Technician editor, Ben Walker, caught up with AAT’s tax expert, Michael Steed MAAT, in this exclusive video to hear his thoughts on the change.

Adam Harper is AAT's Director of Strategy and Professional Standards.

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