Tue 21 Nov 2023

The Child Benefit implications of Separation and Divorce

This blog relates to an issue that has been present for several years now but was highlighted in a recent article by the Low Incomes Tax Reform Group (an initiative of the charity the Chartered Institute of Taxation).

This is relevant to you if all of the following apply:

  • You have a child that qualifies for you to receive child benefit.
  • Since the child was born, you have separated or divorced from the child's other parent.
  • Either you or the other parent (or any new partner that either of you have) earn over £50,000 so are potentially subject to repayment of some/all of the child benefit via the High Income Child Benefit Charge.

The first step is to be clear about the following:

  • Only one person can claim child benefit, you cannot do it jointly as a couple.  That person is the person who signed the claim/application form.
  • The payment of the benefit can go into any bank account i.e. the person physically receiving the payment does not need to be the person who claimed.  It would not be unusual for one parent to complete the application, but for the payments to go into an account in the other parent's name.
  • In the event that separated parents share care and residence of the child(ren), competing entitlements can arise for claiming child benefit.  Parents are very much encouraged to work this out between themselves, but, in the event of disagreement between the parents post-separation an HMRC officer may decide the priority for entitlement.  It is also important to note the interaction between child benefit and child maintenance (money paid by one parent to the other to help with the child's everyday living costs). The relevant authorities presume that the person receiving the child benefit has primary responsibility for day-to-day care of the child and therefore will be the "receiving" parent for any child maintenance. But this can be challenged by evidence led from the parents, with the onus on the parent who wishes to disprove the presumption.

Whilst a couple, if you or your partner earns over £50,000 then any child benefit received will be partially/fully recovered via the High Income Child Benefit Tax Charge.  A partner is defined as "someone you’re not permanently separated from who you’re married to, in a civil partnership with or living with as if you were".

However, following separation then the "over £50,000" test no longer applies to the parent who is not named on the application.  It does though continue to apply to the named applicant, or indeed any new partner of theirs.

We split the possible implications and actions into the following two categories.

1.  You (or your new partner) earn over £50,000:

  • If you are the person who physically receives the child benefit then there is no change and the tax charge will continue to apply.
  • Similarly, if the application is in your ex-partner's name and they receive the cash payment then no change is required.
  • The issue arises if you are the named applicant but the payments are going to your ex-partner.  In this case, the tax liability falls on you even though you do not receive the associated payments.
  • Further, there is no need for you to incur the tax payment as the act of separation would mean that your income would no longer be assessed if your ex-partner was the applicant.
  • At the extreme, if your new partner earns over £50,000, and earns more than you, then the tax burden would in fact fall on them (even though they are not directly connected to the child).
  • If relevant, you should ideally speak to your ex-partner, stop your current application and ask them to apply in their own name.  This would allow them to continue to receive the payment, but without any unnecessary tax liability arising on you.

2.  You earn less than £50,000:

  • If child benefit is being paid then consider who is the named applicant and who receives the cash payment.  If you are not the applicant is there an argument that you should be on the basis that no tax liability would arise?
  • It was possible to apply for child benefit but to opt not to receive the payment.  This was relevant as the named applicant is credited with National Insurance contributions that count towards State Pension entitlement (whilst the child is under 12).  If you do not earn sufficient to accrue the State Pension entitlement via earnings then this route is beneficial.  In this scenario, it is likely that you were the named applicant and so it is likely that you should now request to be paid the child benefit as no offsetting tax liability will arise.
  • Did you not bother submitting an application at all for child benefit as your ex-partner earned over £50,000 so would have incurred an offsetting tax charge?  Following separation, that tax charge will no longer arise and as such you should consider an application in your own name with the benefits being both the cash payment of the child benefit but also the potential National Insurance credit to benefit your future State Pension.
  • The only caveat here is if your new partner earns over £50,000 as then any tax charge may well fall on them.

Separation and divorce are a stressful and complex period, and child benefit is unlikely to be near the top of the list of issues to be dealt with during that time, but both the short term cash payment and the long term State Pension entitlement can have considerable value and are very much worth consideration.

Both Morton Fraser MacRoberts' Wealth Management Team and our Family Law Team can assist if needed.


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