HMRC To Scrap Child Benefit Loans

In 2012, child benefit became partially means tested- it was restricted for high earning households and taken away altogether for households where both parents earned a certain wage. HMRC is now supporting parents who’s sole income is child benefit by asking those who are no longer entitled to the benefit to disclaim it or pay it back on their self assessment system through tax returns.

However, due to a loophole in the way that the self assessment system works, the high earning parents were able to take advantage of a interest free loan by receiving child benefit in advance of the repayment. For example, child benefit paid between April 2012 and April 2013 would be due for repayment on the deadline of 31st January 2014. In some cases it could be collected under a tax code the next year, giving a longer extension on the loan.