MSE News: Budget 2012: Child benefit cut partially reversed

AirlieBird

MrChips wrote: »

Are there any detailed proposals re the child benefit changes?

Yes

http://www.hmrc.gov.uk/budget2012/tiin-0620.pdf

Legislation will be introduced in Finance Bill 2012 that applies a new income tax charge to taxpayers who receive Child Benefit themselves or whose partner receives Child Benefit. The charge will only apply to taxpayers whose income is more than £50,000 for the tax year. If both partners have income of more than £50,000 for the tax year, the charge will apply only to the partner with the highest income.

A partnership comprises:
• a married couple living together;
• civil partners living together;
• a man and a woman who are not married to each other but who are living together; or
• a man living with a man or a woman living with a woman who are living together as if they were civil partners.

For taxpayers whose income is between £50,000 and £60,000, the amount of the charge will be one per cent of the amount of Child Benefit for every £100 of income that exceeds £50,000. A taxpayer whose income exceeds £60,000 will be liable to the charge on the full amount of Child Benefit. For example, Child Benefit for two children is £1,752. For a taxpayer whose income is £54,000, the charge will be £700.80 – i.e. £17.52 for every £100 earned above £50,000. For a taxpayer whose income is £62,000, the charge will be £1,752.

An individual who has income above £50,000 but is not entitled to Child Benefit themselves will only be liable to the charge for any period of the tax year during which they are living with a Child Benefit claimant whose own income is below £50,000.

Child Benefit itself is not being made liable to tax and the amount that can be claimed is unaffected by the new charge. It can continue to be paid in full to the claimant even if they or their partner have a liability to the new charge. Child Benefit claimants will be able to elect not to receive the Child Benefit to which they are entitled if they or their partner do not wish to pay the new charge. The claimant may subsequently decide to withdraw that election if they or their partner are no longer liable to pay the charge.

The measure of income that will be used will be the individual's adjusted net income. This is an existing method of determining an individual's income and is currently used to work out entitlement to personal allowances for someone aged 65 or over or who has income over £100,000.

Adjusted net income is calculated in a series of steps. The starting point is "net income" which is the total of the individual’s income subject to income tax less specified deductions, the most important of which are trading losses and payments made gross to pension schemes. This net income is then reduced by the grossed-up amount of the individual’s gift contributions and the grossed-up amount of the individual’s pension contributions which have received tax relief at source. The final step is to add back any relief for payments to trade unions or police organisations deducted in arriving at the individual’s net income. The result is the individual’s adjusted net income.

The amount of the charge will be collected through self assessment (SA) and PAYE. Individuals who think they may be affected by these proposals do not need to do anything now. HMRC will be writing to taxpayers with income above £50,000 in the autumn.

AJS-saver

Definitely need to understand how this is assessed as most peoples expected income at beginning of the tax year and what they actually receive are rarely the same.

Taxable benefits like car allowance not being included is a significant difference for some as it will take them over the £50k threshold.

But all of this is better than what was expected, nothing like trailing some really bad news first to make you grateful for what actually does happen!

rogerblack

jenfa wrote: »

As a result of my husband's pay we will lose the child benefit even though I don't work. What I am interested in is the credit that I thought I received by claiming child benefit against my National Insurance premiums

It's likely that as with many other benefits - income support, ESA, for example, you will retain an underlying entitlement though you are not actually paid.
This will mean that you are still getting NI credits.

rippedoff3

Thankyou that does make it eaier to understand, so paying extra into his pension may be a good option for my DH!

Lifes_Grand_Plan

rippedoff3 wrote: »

How will this work? Will it be based on gross or net income?
Still think its very unfair. My Dh works very hard and works very long hours to earn approx 50k he pays the higher tax rate and we chose for me to stay at home with our four children. We lose the child benefit but my next door neighbours both earn £30K and receive it as well as paying lower tax. Why not make it fair per household income?

You just answered your own question... you CHOSE to stay at home....

Your next door neighbours may earn £30k each per year, but presumably pay for childcare (if their kids aren't in school) at a cost of £8k ish per year for one child, or a lot more if they have two, three or more....

Plus if they are both working, they may have to run two cars to get to separate workplaces etc...

Not to forget the unquantifiable of course.... not only are the neighbours paying silly amounts of their wages for childcare... they are also missing out on spending quality time with their kids that you benefit from....

People (in general, not specifically you) are always too quick to have a moan that they are "losing out" without looking at it from the other side.

JimmyTheWig

jenfa wrote: »

As a result of my husband's pay we will lose the child benefit even though I don't work. What I am interested in is the credit that I thought I received by claiming child benefit against my National Insurance premiums that I can't pay because I am bringing up a child. I am sure when we originally applied for CB this was included does anyone know what will happen to those?

If I asked my husband's bank or employer how much he earned they would say that is confidential but the child benefit is in my name so I'm not sure how this is going to be administered because he does not have to tell me how much he earns.

It sounds like, from AirlieBird's very useful quote, you will still claim child benefit but your husband will pay extra tax of the relevant percentage of your child benefit.

So, you still get the money paid into your account each month (very useful in terms of families where the wage-earner uses their money as an abusive hold over the home-maker).
You still get your NI credits.
You don't need to know how much your husband is earning.

[Obviously I'm not saying that you are in an abusive relationship, jenfa!]


What I don't understand from AirlieBird's quote, however, is whether the £50k and £60k figures are gross or net? From reading it it sounds like net, but that sounds too generous from this government!

jsg2

How does salary sacrifice apply to this?

I make payments to my company pension via salary sacrifice, and also have a salary sacrifice for receiving childcare vouchers.

In total this is worth over £5000 and would make quite a difference in how much I would be charged.

chelle333

This rule is madness ! why should a single earner household lose out and a couple with two personal allowances keep their child benefit Completely ridiculous and really unfair, what were they thinking ??????? they not going 2 keep there voters this way.

Lifes_Grand_Plan

chelle333 wrote: »

This rule is madness ! why should a single earner household lose out and a couple with two personal allowances keep their child benefit Completely ridiculous and really unfair, what were they thinking ??????? they not going 2 keep there voters this way.

Something tells me you aren't a Tory voter anyway chelle....

You could look at it the other way though, every couple where both parents earn up to £49,999 might now vote for them....

Doctor_Reg

Legislation will be introduced in Finance Bill 2012 that applies a new income tax charge to taxpayers who receive Child Benefit themselves or whose partner receives Child Benefit. The charge will only apply to taxpayers whose income is more than £50,000 for the tax year. If both partners have income of more than £50,000 for the tax year, the charge will apply only to the partner with the highest income.

A partnership comprises:
• a married couple living together;
• civil partners living together;
• a man and a woman who are not married to each other but who are living together; or
• a man living with a man or a woman living with a woman who are living together as if they were civil partners.

So it seems that people are better off apart than together? If a couple where one earns over 60K separate then the other one can start claiming child benefit? Likewise if a new couple decide to move in together they would lose it? Seems strange and really open to abuse.