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  • FIRST POST
    • notgreatatsavingmoney
    • By notgreatatsavingmoney 5th Oct 17, 4:09 PM
    • 7Posts
    • 1Thanks
    notgreatatsavingmoney
    Household Tax vs. Benfits
    • #1
    • 5th Oct 17, 4:09 PM
    Household Tax vs. Benfits 5th Oct 17 at 4:09 PM
    Hi


    Due to new baby and the reduced hours my wife is working / everything becoming more expensive! I've taken to reviewing our household finances in the hope of avoiding having to do much more overtime.


    This prompted a conversation with a friend. Their household income is virtually identical to ours now that my wife is working less, but because they as a couple earn similar amounts, whilst in my household I earn significantly more than my wife, my friend actually ends up with more free cash each month.


    That prompted me to read up on HMRC and understand that tax is completely done at an individual level (unless below a certain threshold and then you can transfer some allowance, which we're not). Fine!


    So I looked into child benefits for my wife due to her low income. Here I've found we're entitled to claim, but because the household income is over a threshold, they'd take it all back.


    My question is whether I'm missing a loophole? or anything I should be considering /anything I can pay solely from my wages e.g. a friend has advised I pay for childcare rather than my wife.


    To me, it looks like we as a family are worse off compared to an identical family, just because of the income split.


    It also looks like we're worse off because someone decided tax should be done on a personal level but benefits at a household level....for me it should be one rule! I don't want to receive any benefits, but at the same time, I don't want to be penalised.


    I do hope I'm missing something.
Page 1
    • Pennywise
    • By Pennywise 5th Oct 17, 4:37 PM
    • 9,416 Posts
    • 17,125 Thanks
    Pennywise
    • #2
    • 5th Oct 17, 4:37 PM
    • #2
    • 5th Oct 17, 4:37 PM
    You're understanding is entirely correct sadly.
    • xylophone
    • By xylophone 5th Oct 17, 6:17 PM
    • 23,633 Posts
    • 13,761 Thanks
    xylophone
    • #3
    • 5th Oct 17, 6:17 PM
    • #3
    • 5th Oct 17, 6:17 PM
    Are you saying that your wife is not claiming CB because you earn over the threshold?

    See

    http://www.pruadviser.co.uk/content/knowledge/technical-centre/child_benefit_trap/

    Had you thought about increasing your pension contributions?
    Last edited by xylophone; 05-10-2017 at 7:46 PM. Reason: typo
    • 00ec25
    • By 00ec25 5th Oct 17, 6:42 PM
    • 5,554 Posts
    • 4,933 Thanks
    00ec25
    • #4
    • 5th Oct 17, 6:42 PM
    • #4
    • 5th Oct 17, 6:42 PM
    a long time ago women violently objected to being classed as a possession of their husbands and so campaigned very successfully to be treated as an individual income earner, not as an adjunct of a husband's income. The married man's allowance thus disappeared.

    as with everything in life, that means there is no perfect solution since, as you so correctly list, two individuals each get a tax free allowance, and and so have a higher post tax combined income than one person earning the same gross, but only having one tax free allowance, as the other person earns nothing and so "wastes" their allowance.

    for political reasons it has been decided that £50,000 per year makes you "rich" and is thus the totally arbitrary threshold for child benefit as you "obviously" do not need state handouts given such richness. The ridiculous disparity in the net position of a household with 2 earners below 50K keeping their CB, compared to a household with one >50K and one non earner losing their CB, is a matter for the Daily Mail reader to get excited over.
    • sheramber
    • By sheramber 6th Oct 17, 6:03 PM
    • 3,961 Posts
    • 2,946 Thanks
    sheramber
    • #5
    • 6th Oct 17, 6:03 PM
    • #5
    • 6th Oct 17, 6:03 PM
    It is NOT household income for child benefit- it is the income of the highest earner than counts.
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