Marriage, separation and the High Income Child Benefit Tax Charge

Marriage allowance.

If you are married or in a civil partnership and have insufficient income to fully use your personal allowance (£11,500 2017-18), then you can elect to transfer 10% of your allowance to your partner if then are a basic rate tax payer. This is worth up to £230 for 2017-18. A claim can now be made on behalf of a deceased person and back dated 4 years.

Separation.

For tax purposes, it is the date of separation which is important. You are treated as together unless you are:

  • Separated under an order of a court or competent jurisdiction
  • Separated by deed of separation, or
  • Separated in circumstances in which the separation is likely to be permanent.

For capital gains tax (CGT) the tax-free exemption for transfers between spouses remains for the year of separation. Nil gain/nil loss treatment will cease to apply in the year following separation. Transfers between husband and wife after the year of separation are made at market value.

A married couple can only have one exemption for their “principle private residence”. From the date of separation, they have one each and may need to make an election to show which property is their main residence.

Any maintenance payments made under the divorce settlement are free from tax in the hands of the recipient. No tax relief is available for the payor.

Stamp duty/stamp duty land tax is not normally charged on the transfer of assets between spouses or on divorce.

High Income Child Benefit Tax Charge (HICBC)

With effect from 7 January 2013 there is a potential claw-back of Child Benefit (CB) which may affect you if:

  • You have children and claim CB and,
  • Your own income or the income of your partner was over £50,000

The higher earner must report this on a Self-Assessment Tax Return. There is a taper on the claw-back on income between £50,000 and £60,000 (the charge is 1% of the Child Benefit received for every £100 of income between £50,000 and £60,000 limited to the Child Benefit received).

If one partner’s income exceeds £60,000 in a tax year consider electing not to receive child benefit, in which case the HICBC will no longer apply. Even here, if one of the partners has low-income, they may still benefit from claiming (and choosing not to receive the payments). They will then qualify for National Insurance credits and State Pension purposes.

Child benefit2016/172017/182018/19
Weekly rates of child benefit
Eldest/only child£20.70£20.70£20.70
Other children£13.70£13.70£13.70
Guardian’s allowance£16.55£16.70£17.20

Published 14 October 2017.

Updated 17 July 2018.