Higher rate tax

Pennywise

Even simpler would be to scrap it and increase child tax credits by the same amount. Households eligible for tax credits would continue to receive it, whereas ineligible households (due to household income being too high) wouldn't receive it. It would also be covered in the existing tapering away of tax credits according to high much more the income is above the upper household income limit. Simples.

drc

pqrdef wrote: »

The point about the 2 x £40K couple is that neither is a higher rate taxpayer, because the threshold is above £40K. But they make £80K between them.

Yes I know. And I was agreeing with the suggestion by Renovation man that if you have a 2 parent household and one is a higher earner and the other is not, then the parent who is not a higher earner could claim the CB. In families where they are both higher earners the increased salary might offset losing the child benefit and in the case where there are 2 earners just below the threshold, then one will get CB (because it can only be claimed once per child). But as I said, I don't think CB should be scrapped at all as it is the only universal benefit and should stay that way.

movilogo

due to household income being too high) wouldn't receive it

Why on household income? This penalizes people who decided to marry and encourages people not to get married. Either give it for everyone or stop it for all.

Why poor people will be encouraged to have more children? If they can't earn enough money then they should not breed.

pinkteapot

movilogo wrote: »

Because it reduces your money in hand :mad:

Your original point sounded like you were saying that tax is evaluated individually and so couples get screwed. pqrdef was querying this statement. I am going to as well.

Suppose you have two people, each earning £40k. Neither pays any tax at 40%. If you evaluated their income on a joint basis, firstly they'd lose one person's tax-free allowance and secondly they'd pay 40% on almost half of their income!

So, going back to pqrdef's point, why do people get screwed by the government assessing tax liabilities on an individual instead of joint basis?

chewmylegoff

child benefit and child tax credit should both be consigned to the bin in my view.

instead the personal allowance should be extended for anyone with dependent children.

Batchy

I like a simple method, just cause someone who earns a lot claims it, shouldnt we encourage society as a whole to have children and not just the ones who dont work, or wont work. Doesn't Bode well for future generations.

Batchy

chewmylegoff wrote: »

child benefit and child tax credit should both be consigned to the bin in my view.

instead the personal allowance should be extended for anyone with dependent children.

Nothing for the unemployed then... I like that!

WestonDave

Couples with 2 moderate incomes would probably prefer individual assessment as they would both get a tax free allowance and a 20% band before paying higher rate tax. Couples with one high earner and one non earner would prefer joint assessment because at least that way they'd get both tax free allowances (assuming the full allowance was transferable rather than the old married couples allowance of £1700ish).

Renovation Man probably has the simplest solution to this. If you let anyone not paying higher rate tax claim CB and anyone paying it not claim, then its pretty straightforward. The proposals as they stand have a major problem - if my wife claims CB and I earn enough to pay higher rate tax, we have to disclose this to each other, or at the very least I have to be aware that she claims it in order to disclose it in my tax returns. I presumably can't force her to stop claiming it, so as a higher rate payer my only recourse is to disclose it and have it "taxed" off my income. That probably has some interesting human rights and privacy implications if an enterprising lawyer was to pick it up. It also causes a potential data protection issue at the Revenue if they start enforcing this, because if they start pinging me for not disclosing CB in the family, they would have to breach the confidentiality of my wifes records to explain why they are doing it.

Another problem is that my wife could be receiving CB but I get it taxed back off my income - how is that going to be justified especially if we are estranged! How do you define a couple - if I have a kid with someone but am no longer in a relationship with them - are we a couple for this purpose because the kid is "ours" or are we not because we don't live together.

I can see that the proposals as they stand/stood made for the biggest saving, but they also create a potential minefield to administer!

pqrdef

There seems to be an idea in circulation that, according to the original plan, a higher rate taxpayer would get child benefit clawed back even if they were not the parent claiming the benefit. But that can't have been the plan, because it couldn't possibly work.

But the issue really is that a single parent earning £50K would lose CB where a 2 x £40K couple would not.

I merely suggest that there's a problem anyway, because the single parent is paying higher rate tax and the couple isn't.

pqrdef

WestonDave wrote: »

if my wife claims CB and I earn enough to pay higher rate tax, we have to disclose this to each other, or at the very least I have to be aware that she claims it in order to disclose it in my tax returns. I presumably can't force her to stop claiming it, so as a higher rate payer my only recourse is to disclose it and have it "taxed" off my income.

What if her kids aren't yours? They claw back from you benefit you don't get, paid in respect of kids that aren't yours? Can't see it.