With the introduction of new rules for Child Benefit looming, divorced couples will need to be particularly careful to understand the implications.
From 7th January 2013, those earning between £50,000 and £60,000 will experience gradual cuts to Child Benefit.
If you earn over £60,000, the Child Benefit will be lost completely.
Child Benefit can still be claimed in these circumstances, but the money will be clawed back through the self assessment tax system.
This creates a situation where a divorced parent living with a new partner could create a tax bill for that partner by continuing to claim Child Benefit.
In that scenario, the new partner would pay the Child Benefit clawback even though it was not in respect of his or her children.
With nearly 120,000 divorces taking place in the UK last year alone, we expect this sort of complication to be commonplace from 7th January onwards.
There are limited planning steps that can be taken to mitigate this new tax charge, but the most important thing for parents to do now is to understand the implications and discuss this aspect of their finances with their partners.
Photo credit: Flick/Im Kelsi
