Child Benefit, Higher Earners and Separation

Child Benefit, Higher Earners and Separation

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Discussion

Steve vRS

Original Poster:

4,836 posts

240 months

Thursday 8th December 2016
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My wife and I are separating early in the New Year. She will be our two children’s primary carer and the children and they will nominally live with her more of the time than with me; our maintenance arrangements will reflect this. She will continue to claim and receive the child benefit that she has done since they were born. As is fitting, and indeed expected of a PH member wink , my earnings are above the threshold which child benefit can be claimed and so pay it back through my tax code.

Once we are separated, do I still need to ‘repay’ the child benefit through taxation or as we are now two separate households, will the Inland Revenue recognise this split?

I have tried to find this answer on line but have struggled so know in advance that PH would be the palace to turn!

Eric Mc

121,782 posts

264 months

Thursday 8th December 2016
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I always thought it was a "household" matter. If you are no longer living (or won't be soon) in the family home, then the household income will be her's only.

UpTheIron

3,992 posts

267 months

Thursday 8th December 2016
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Assuming she is not a high earner, then she should claim the benefit instead.

alock

4,224 posts

210 months

Thursday 8th December 2016
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Slightly off topic, but I've also heard it's better for a partner to claim it and for you to pay it back if you earn over £60k anyway. Claiming it allows her to earn national insurance credits rather than being unemployed ant not earning any.

Steve vRS

Original Poster:

4,836 posts

240 months

Thursday 8th December 2016
quotequote all
To clarify, she will earn a good salary but below the £50k threshold and will be claiming child benefit.

Composite Guru

2,205 posts

202 months

Thursday 8th December 2016
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I'm in the same boat and stopped repaying the benefit after a year (backdated through my tax return).

So in answer to you question, as long as you are living at a different address and she is receiving the benefit then you won't need to pay it back.

The whole thing is a total joke IMO as you can both earn under the threshold and still receive the benefit but if one person earns over it and the other doesn't earn at all then you need to pay it back.

Joke system that needs to be sorted.

Welshbeef

49,633 posts

197 months

Thursday 8th December 2016
quotequote all
alock said:
Slightly off topic, but I've also heard it's better for a partner to claim it and for you to pay it back if you earn over £60k anyway. Claiming it allows her to earn national insurance credits rather than being unemployed ant not earning any.
Anyone with one partner earning over £60k the other not or not even working needs to apply instantly for a zero payment child benefit they will then get a NI credit for up to 12 years /if only 1 child 12 years but it could keep going if she has 2/3/4 kids over he years and would end when he last hit 13yesrs old.


Ginge R

4,761 posts

218 months

Thursday 8th December 2016
quotequote all
Steve,

Fallout from the Child Benefit tax charge is throwing up lots of unfairness and (potentially) grounds for financial hardship.  If you separate from your partner, it’s vital that you specifically clarify who pays for the Child Benefit tax charge in the financial settlement that is presented in your divorce proceedings. This is important because the Child Benefit tax charge is applied to the higher earner regardless of whether they themselves actually receive the Child Benefit or not. 

As, as you imply (!), this is invariably the male/major PH wage earner and it is applied in the self assessment which is completed several months after the end of the tax year and therefore (possibly) many months after a separation. Other scenarios have been kicked up too, ones which stretch the realms of credibility to the limit.  And possibly, beyond.  

Take a supposed ‘straightforward’ family.  If the parents get divorced and the children live with the mother who then has a new partner, and that partner is the higher earner, then it is he who gets to repay the clawback even though they are not his children. Conversely, if you, as an estranged father (for instance, bear with me, I know you're not but someone else might be) is claiming child benefit for children who live with their mother and this father subsequently has a new partner who happens to earn more than him, then this new partner may be liable to pay the money back if they earn over the threshold.

This is why it’s vital to ensure you have clarity over who pays the tax charge in the event of a divorce. It’s also imperative too, and again, I know this doesn't apply to your soon to be ex wife, that you still claim for your child benefit.  You might think it’s a major inconvenience to have to go through the hassle of holding onto the money and then paying it back, or doing a tax return, but you must do it because the years then count as periods that you are paying National Insurance Contributions, and crucially, this will have a big impact on your state pension.

Look on the bright side, if you do get paid it and have to repay it, stick it in premium bonds until you have to send it back.. you just might win the big one.

Welshbeef

49,633 posts

197 months

Thursday 8th December 2016
quotequote all
Ginge R said:
Steve,

Fallout from the Child Benefit tax charge is throwing up lots of unfairness and (potentially) grounds for financial hardship.  If you separate from your partner, it’s vital that you specifically clarify who pays for the Child Benefit tax charge in the financial settlement that is presented in your divorce proceedings. This is important because the Child Benefit tax charge is applied to the higher earner regardless of whether they themselves actually receive the Child Benefit or not. 

As, as you imply (!), this is invariably the male/major PH wage earner and it is applied in the self assessment which is completed several months after the end of the tax year and therefore (possibly) many months after a separation. Other scenarios have been kicked up too, ones which stretch the realms of credibility to the limit.  And possibly, beyond.  

Take a supposed ‘straightforward’ family.  If the parents get divorced and the children live with the mother who then has a new partner, and that partner is the higher earner, then it is he who gets to repay the clawback even though they are not his children. Conversely, if you, as an estranged father (for instance, bear with me, I know you're not but someone else might be) is claiming child benefit for children who live with their mother and this father subsequently has a new partner who happens to earn more than him, then this new partner may be liable to pay the money back if they earn over the threshold.

This is why it’s vital to ensure you have clarity over who pays the tax charge in the event of a divorce. It’s also imperative too, and again, I know this doesn't apply to your soon to be ex wife, that you still claim for your child benefit.  You might think it’s a major inconvenience to have to go through the hassle of holding onto the money and then paying it back, or doing a tax return, but you must do it because the years then count as periods that you are paying National Insurance Contributions, and crucially, this will have a big impact on your state pension.

Look on the bright side, if you do get paid it and have to repay it, stick it in premium bonds until you have to send it back.. you just might win the big one.
It will not have any bearing on his state pension he is and has been earning over £60k all this time so paying NI in full no credits required. His Mrs on the other hand might get zilch.

Ginge R

4,761 posts

218 months

Thursday 8th December 2016
quotequote all
You're absolutely correct, I used 'you' in the general sense of working it out as a couple and should have been clearer - I originally wrote it for a couple I knew who were splitting up and adapted it (badly in that bit). Lots of women (usually) in receipt of the benefit don't claim. It's a big problem, recently aired again.

https://www.theguardian.com/money/2016/nov/12/refs...

Steve vRS

Original Poster:

4,836 posts

240 months

Thursday 8th December 2016
quotequote all
So are you saying when I am separated, I should claim child benefit and then pay it back even if my wife is claiming as well?

Ginge R

4,761 posts

218 months

Thursday 8th December 2016
quotequote all
Not nessesarily. You're separating. So, make sure that it's clearly defined who is taking responsibility for the tax charge.

http://www.accountingweb.co.uk/any-answers/child-b...

Read the comments at the foot of this. Bottom line is, make sure you define it clearly - if you arrive at a financial agreement, in the interests of fairness, the tax charge should be taken into account.

https://www.divorcefinancetoolkit.co.uk/2012/05/ch...

Edited by Ginge R on Thursday 8th December 19:29