A million families may have child benefit ‘clawed back’
Up to one million families face having their child benefit clawed back through complicated self-assessment tax returns, Labour has warned.
The Treasury has confirmed around 200,000 parents have opted out of claiming the benefit ahead of reforms due to come in on Monday that mean the top 15 per cent of earners will no longer be eligible to claim some or all of the cash.
But around 800,000 families are known to be affected by the reforms with a further 400,000 potentially hit through changes in income over the next financial year.
Shadow Treasury minister Chris Leslie said: “These figures mean up to a million families now face having all their child benefit clawed back through complicated self-assessment tax returns at the end of the year.
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“This is a costly administrative nightmare that could also lead to family rows as couples decide who takes the financial hit. And it’s unfair too, because single earner families on £50,000 will have their child benefit cut while some couples earning as much as £100,000 keep all of theirs and millionaires actually get a tax cut.
“With every passing day it’s clearer and clearer that David Cameron and George Osborne totally failed to think this policy through.”
HM Revenue and Customs chief executive Lin Homer said twice as many families had already opted out of receiving the payment than had been expected, and insisted the changes were going “better than expected”.
But the Centre for Social Justice (CSJ) warned the cuts risked “pouring further fuel on the fire” of family breakdown.
Managing director Christian Guy said: “UK family breakdown is spiralling out of control – the chaotic child benefit reforms being introduced on Monday risk pouring further fuel on the fire.
“The new rules will mean that married couples where one earns over £50,000 pa will be unable to avoid losing some or all of their child benefit. Meanwhile, similar couples who are cohabiting will face unenviable choices: a severe financial penalty if they marry or breaking the law if they deny their relationship status.
“This creates a potential ‘marriage penalty’, despite evidence showing how crucial marriage is to stable families and children. Research illustrates that break-up rates are three times higher for couples who cohabit compared with those who marry.”
The CSJ warning follows a report by the Institute for Fiscal Studies yesterday that said families would end up losing up to 65p of every extra pound they earned – making it more likely they would work less or put more into pension funds to avoid the hit.