Child Benefit reforms leave parents with tax nightmare

  Up to 850,000 parents may be required to fill out their own Self Assessment Tax Returns after missing a deadline to declare they no longer qualify for child benefit.


Under reforms which came into effect on 7th January, over a million parents earning more than £50,000 per year are set to lose all or some of their child benefit payments.

However up until 6th January only 250,000 had voluntarily opted out of the child benefit system, leaving 850,000 parents who will continue to receive child benefit as usual but have it clawed back from them in tax via self assessment.

Despite a last minute rush in applications, many thousands of parents are still unaware of the changes which could land them with substantial fines if they fail to complete their self-assessment forms.

Some of those affected may already be in self-assessment but for the majority it will be the fist time they have had to complete the process.  Since 80% of those who already fill in their returns online have to hire an accountant to assist them, parents are looking at increased costs to comply with the regulations.

Critics of the reform have claimed that it is unfair to families.  In households where one earner takes home more than £60,000 a year the family will lose all of their child benefit whilst in some cases those in which both parents earn £50,000 could keep their benefit.

Labour Treasury Minister Chris Leslie branded the policy a “very costly administrative nightmare” for parents and also pointed out that families were likely to face a big pre-election tax bill in 2015 as bills for repayments of child benefit from 2013/14 would begin to be sent out.

Whilst Conservative Party chairman Grant Shapps acknowledged the frustration of extra form filling for those faced with losing their benefits, the government also insisted that the cut was necessary to help reduce Britain’s welfare bill and that higher earners had to make a fair contribution to reducing the country’s debts.

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