Jeff Salway: Child benefit changes will get worse

JUST a few days after the passing of Blue Monday, we now have Black Sunday. The marketeers and PRs who sold the idiotic idea that the third Monday in January is the most depressing of the year have a lot to answer for.

Jeff Salway. Picture: Jane Barlow

But not even the nonsensical world of PR has come up with a way of making a branding exercise out of the last Sunday before the online tax return deadline.

This year it falls today. And thanks to the child benefit fiasco – the dreamchild of a chancellor who once pledged to simplify the tax system – more of us than ever are subject to the nightmare that is self-assessment.

The child benefit reforms have been a mess from the start, and it’s about to get worse. About 105,000 parents are about to be whacked with a £100 fine for missing this Friday’s deadline, HMRC estimates.

Under the changes, which took effect last January, households where at least one earner has income above £50,000 lose some or all of their child benefit. The benefit paid out to those households is clawed back through the high income child benefit charge (HICBC) at a rate of 1 per cent for each £100 of income above £50,000, being removed entirely at £60,000.

The initial controversy surrounded the fact that couples each earning £49,999 (so with a joint income of almost £100,000) still get the full benefit, while those with just one earner who has income above £50,000 lose some or all of theirs.

In the long term, however, the biggest error will prove to be the decision to claw back overpaid benefits through the tax system (through the HICBC).

That drags hundreds of thousands more people into self-assessment. About 400,000 households have chosen to stop receiving child benefit payments they’re entitled to, rather than enter the labyrinthine hell of tax returns.

But it’s clear that awareness of the HICBC is far from universal – for many people, the first they’ll know of it is when HMRC starts dishing out the fines next month.

For some people the problems don’t end there, because the tax deadline is now a target for fraudsters. Copycat websites that charge for services that HMRC provides for free pose a real risk to people filing tax returns. Equally dangerous are scam emails purporting to be from HMRC and informing recipients of tax rebates they’re owed. The emails insist on taking banking details so they can make the refund, only to use that information for fraudulent purposes.

For the record, HMRC never sends rebate emails, so if you see one, report it then delete it.

Sadly, plenty of people new to self-assessment will be caught out by HMRC fines or unnecessary charges. And all in the name of making the tax system less complex, according to George Osborne.