Lin Homer: The HMRC chief is urging parents to register for tax self-assessment
Tens of thousands of families face hefty fines on top of losing their child benefits after they missed a deadline to apply for a tax return.
Around 165,000 households that have an earner on a salary of at least £50,000 and have received child benefit this year failed to register for self assessment.
They risk fines of up to 100 per cent of their child benefit payments.
Cuts introduced in January mean that up to a million families are no longer entitled to all or part of the payments, worth around £1,700 a year for two children.
Households with someone earning more than £50,000 lose a proportion of the benefit and from £60,000 it has to be forfeited entirely.
The complicated way in which the change was introduced required parents to either opt out in advance from receiving the benefit by January 6 this year, or register with the taxman for a self assessment return by October 5.
A HM Revenue & Customs spokesman said: ‘More than 29,000 people registered for self assessment over the weekend, taking the total registrations to 160,000.
‘This means that fewer than 165,000 people still need to take action and on past experience we expect more people to register in the coming days.
‘Although we are past the deadline, people should still register for self assessment to minimise any penalties they may face.’
To avoid any fines – set at between 10 per cent and 100 per cent of the money owed back to the taxman – parents should register for self assessment as soon as possible.
HMRC has said that as long as families register and file their return by January 31 2014 – the deadline for online returns rather than paper returns – any penalty for missing the deadline will be disregarded.
Child benefit is worth £20.30 per week for the first child and £13.40 per week for each subsequent brother or sister.
HMRC chief executive Lin Homer said on Friday that twice as many families had opted out of receiving the payment than had been expected, and insisted the changes were going ‘better than expected’.
Miss Homer told Radio 4’s Today programme: ‘We have been very proactive. We have written to 800,000 people.’
She said that higher-rate taxpaying parents should ‘get off their backsides’ and register for self-assessment tax returns.
But the Centre for Social Justice warned the cuts risked ‘pouring further fuel on the fire’ of family breakdown.
The system for recovering the money has proved especially controversial because a family with a household income of £99,000 can keep all their benefit while one with a single earner on £60,000 would lose all theirs.
The withdrawal of child benefit means a single earner paid between £50,000 and £60,000 in a family with four children is hit with a ‘marginal tax rate’ of 73 per cent, according to experts.
This top rate of tax is worked out by treating the loss of child benefit as though it was a tax. Affected families have lost an average of £1,300 per year.
Simon Walker, director general of the Institute of Directors, said that high marginal tax rates ‘degrade the motivation to work’ for many.
‘This is a huge disincentive as it is for beneficiaries on the lowest wages – some of them can be paying 70 per cent, 75 per cent,’ he said.