Child benifit loss for higher tax rate earners

SkyeKnight

Well, it would have been even "simpler" to just whack it on top of Child Tax Credits and then taper it away for household incomes over about £42k. I assume they aren't going to do it this way because the press would go wild at the removal of Child Benefit for everyone - or is there another reason I'm not thinking of?

melly1980

SkyeKnight wrote: »

Well, it would have been even "simpler" to just whack it on top of Child Tax Credits and then taper it away for household incomes over about £42k. I assume they aren't going to do it this way because the press would go wild at the removal of Child Benefit for everyone - or is there another reason I'm not thinking of?

Its just an overt way of shafting people who are percieved to be rich to passify the masses who are also getting shafted. This means tested benefits cost them money is nonsense because they already collect this information anyway as a part of CTC and WTC. All they have to do isabsorb the CB into this the taper it away fairly. This way you wouldnt get idiotic boundaries where you can earn 50 quid more then end up 3K worse off, or people on lower money getting Tax credits ending up with more nett income than you or the even more idiotic scenario where families with 30K more nett income get it and you dont because because you earn 1 x 42K.

melly1980

zagfles wrote: »

The problem is that if you try to means test something at a relatively high level of income, the cost the means test is more than the savings made by excluding the minority who'd no longer be eligible. Means testing is only cost effective when you exclude the majority.

That's why they're going for the "simple", and hence unfair, method of simply using the HRT threshold.

As for the loophole of using pension contributions - they never closed it for tax credits. Someone earning £50k with savings can contribute £45k to a pension and get max WTC & CTC, and live off that plus savings! Which is a much bigger loophole than child benefit.

they are closing it though, arent they? Im pretty sure that the UC only enables you to count half of your pension contributions to reducing your taxable income.

zagfles

SkyeKnight wrote: »

Well, it would have been even "simpler" to just whack it on top of Child Tax Credits and then taper it away for household incomes over about £42k. I assume they aren't going to do it this way because the press would go wild at the removal of Child Benefit for everyone - or is there another reason I'm not thinking of?

The £40k threshold for tapering the family element of CTC is being removed next year, besides which tax credits are going to be replaced by the universal credit which will have capital rules. Incorporating child benefit into the UC would basically take it off the majority, not the minority where there's a HRT payer.

They want this to be a seen as a "benefit cut for the rich". It isn't really that at all - but it's politics and will probably be seen as that by the typical thick Sun reading voter who can only understand soundbites. Bit like "it's all the bankers fault" as an in-depth analysis of the financial crisis;)

Carl_AWS

Higher rate threshhold was £43,875 in 2010/11
Higher rate threshold is £42,475 in 2011/12

Contrary to some of the posts above, the higher rate threshold may well go DOWN AGAIN next year, due to the increasing of the Personal Allowance (Lib Dem's pledged to bring this up to £10k but it is only on £7475 at the moment).

If you earn just above the threshold, you can manipulate your own personal higher rate threshold by paying into a pension, or giving Gift Aid donations. This increases your 'basic rate band' and means that you will not be a higher rate taxpayer (i.e. you will still qualify for child benefit!)

zagfles

Carl_AWS wrote: »

Higher rate threshhold was £43,875 in 2010/11
Higher rate threshold is £42,475 in 2011/12

Contrary to some of the posts above, the higher rate threshold may well go DOWN AGAIN next year, due to the increasing of the Personal Allowance (Lib Dem's pledged to bring this up to £10k but it is only on £7475 at the moment).

Shouldn't do. They've already announced that the personal allowance will go up again to £8k+, and that higher rate taxpayers will benefit from it this time. Probably not at 40%, but at 20%, which means the HR threshold inc the allowance shouldn't go down.

Of course they could change their minds come the budget - but these things seem to be announced a year in advance now.