A RAID on child benefits for higher rate tax payers was watered down by George Osborne yesterday, yet the chancellor’s amended system was accused of tying parents up with burdensome new red tape.
The coalition had been set to remove child benefit from any household where an adult earned enough to fall into the 40p tax bracket, which is currently £42,475.
But yesterday’s Budget will only remove the credit entirely from households where at least one parent earns £60,000 or more per annum, using tapered reductions.
For every £100 earned above £50,000, parents will lose one per cent of the benefits they would be owed if they stayed on lower wages. “We want to avoid a cliff-edge that means people lose all their child benefit when they earn just a pound more,” Osborne said.
However, accountants warned that the new system would be complex and costly to administer, and could force up to half a million more people into self-assessment.
The measure will apply to unmarried couples who live together “as if they were civil partners of one another”, said the Chartered Institute of Taxation (CIOT).
“The concept of people living together as if they were married, or civil partners, is new to tax law,” said the CIOT’s John Whiting. “So where a household is formed, or breaks up, over a period of time, how does one define the exact point at which the household begins, or ceases, to exist?” PwC said the change went against the focus on simplification.