Higher tax rate and Child Benefit

InDeepDebt

Hi, just a quick question. Does anyone know when child benefit will be stopped for higher tax rate payers? Also, what period will the Government be using as a period over which you are meant to be a higher rate tax payer?

Last year (2010-2011) my pay before tax was around £44k – so just below the higher tax threshold (£44,475). This year, the tax threshold has reduced to £42,475 so I will be in the higher tax bracket so long as I work a similar number of bank holidays and do a similar amount of on-call cover. I have two children so the amount of child benefit that I (we) get is £1752 – tax free.

So, in order to keep getting child benefit, I need to ‘lose’ some taxable pay. This year I sold some holidays which gives me around £600 a year – next year I may as well buy the holidays instead. I am in need of a bike and can get one through the cycle to work scheme. The likely price bracket of bike will be around £500 which comes out of my pre-tax pay – however, this will be a one off so I want to ensure that it comes out of the correct year. I can also purchase some extra pension which will also reduce my tax liability.

So, back to my question, when do I need to reduce my tax pay from? Will child benefit stop on 1 January 2013 or 1 April 2013? If it’s 1 January, will Dave and Nick be looking at my Apr 2011 – Apr 2012 income or my anticipated 2012 – 2013 income or my income from the calendar year 2012 or is it the anticipated income for calendar year 2013?

In order to buy holidays, buy pension or partake in the cycle to work buy a bike scheme, I need to put forward my options soon. If I don’t need to ‘lose’ any income from next year though then I’d rather hold off paying extra into my pension, sell my holidays and put off buying a bike and use that money to pay off some of the enormous amount of debt that our family is currently in.

Many thanks for reading and any input welcome

Jim

scootw1

I think the point of the cuts was to try to reduce the size of the national debt not to encourage people to come up with imaginative ways to keep the level of benefits they receive.

HRV

hi jim- dont know the answer- just want to say think ur doing the right thing- im not gonna go onto my next pay scale as i will have now worse to do and be worse off- its a no brainer- going back to work full time with baby twins will be hard enough

Transformer

Surely you should not be able to buy and sell holidays and the like to get around benefit level cut offs?

Same as deprivation of capital to gain benefits.

InDeepDebt

scootw1 wrote: »

I think the point of the cuts was to try to reduce the size of the national debt not to encourage people to come up with imaginative ways to keep the level of benefits they receive.

I know perfectly well why the benefit is being stopped. However, someone on £42,474 with two children who gets a pay rise will need to get a rise of over £2900 to actually claw back the money that they have lost.

If you do the sums for me – assume that I am on £44k a year – that is £1,525 (taxable) above the higher tax threshold – yet I will be £1,752 (tax free) a year worse off. So, if I reduce my taxable pay by £1,526 then it will cost me £915 a year in my hand (£76 a month) – yet I’ll get £132 a month child benefit. These are approximate figures as I’ve only taken account of the 40% tax rate and not any national insurance that is paid (if any) above £42,475.

So, based on the above calculations, I may as well buy some more pension for my retirement or/and get a bike and save on diesel – or/and buy an extra five days holiday a year. Seeing as I sold five days this year that will give me an extra 10 days holiday.

Anyone with more than two children will have an even bigger decision to make should they get promoted into the higher tax threshold. Someone with four kids will be £60.50 a week worse off – or £3146 a year tax free. That means that someone on £42,474 who gets a promotion or the offer of overtime will need to earn £47,700+ just to break even. If they have the opportunity to pay into a pension or ‘lose’ some pay some other way – they would be daft not to.


Jim

PS - I assume that you don’t know the answer to my original questions then.

shop-to-drop

I think you can deduct your pension payments from your annual salary too. I agree do what you can as taking this away stinks if they replaced it with a bigger tax free allowance for parents then that would be more fair.

Tebheag

Hi

We are still waiting to find out the actual details of this I believe in was in Jan 2013 that it was meant to be taking effect so will be next year before we know. They will be taking there time on it as going to upset a lot of people especially when two people working can earn about £80k can still get it lol

markdavey

Tebheag wrote: »

Hi

We are still waiting to find out the actual details of this I believe in was in Jan 2013 that it was meant to be taking effect so will be next year before we know. They will be taking there time on it as going to upset a lot of people especially when two people working can earn about £80k can still get it lol

I don't necessarily disagree with the benefit being cut but the above example where a 2 earner family can earn almost £80k and still receive the benefit where as a single earner family loses the benefit at around £42k is JUST NOT FAIR.

I think this is a campaign that Martin could (should) get involved with to raise the profile of this totally unfair change.

gadgeteer_2

scootw1 wrote: »

I think the point of the cuts was to try to reduce the size of the national debt not to encourage people to come up with imaginative ways to keep the level of benefits they receive.

Stating the obvious there dear boy.

But then in the real world, people will always try to maximise their income and lower what taxes they pay.

stroodes

when does the unemloyed or the disabled pay taxes`?????????????????????? yes vat but dont we all?

zagfles

markdavey wrote: »

I don't necessarily disagree with the benefit being cut but the above example where a 2 earner family can earn almost £80k and still receive the benefit where as a single earner family loses the benefit at around £42k is JUST NOT FAIR.

I think this is a campaign that Martin could (should) get involved with to raise the profile of this totally unfair change.

It's also not fair that the single earner family on £45k pays higher rate tax, whereas the 2 earner family on £80k doesn't. And the single earner family gets just one tax allowance, the 2 earner family gets 2.

Part of the reason this country is so divided into 2 and 0 earner households, rather than a fairer spread of jobs like in the rest of Europe.

Anyway - as I've said before I doubt the child benefit change will go ahead as planned. There are too many ways around it - apparently a good one is to transfer it to the grandparents! Plus the supposedly important principle of independant taxation is compromised.