MSE News: Budget 2012: Child benefit cut partially reversed

taylorcez

So... 1) is the 50k to 60k limits net or gros? that is the deal breaker for me.

2) If its being introduced from Jan 13 is the income from that tax year (April12 - April13) being used, in other words the great income clock starts this April! No more overtime for me!

3) Rental income net or gros?

I was hoping this would start tax year 2013-14 so I can do overtime this year but its looking like I better watch my hours from April!

jmfwilts

So, my wife claims the Child Benefit. I think she earns under 50k. She doesn't know that I earn over 50k. To keep this the way I like things, she carries on claiming the benefit, but I pay more tax to payback the benefit for two kids. This sounds like it could be a nightmare to administer.

If she does earn over 50k and she doesn't want to tell me, who gets the adjusted tax code. HMRC are going to have to give it to one or the other, presumably the higher paid, thus potentially causing a confidentiality issue?

his_wife

So yet again, the middle earners get penalised, not only do we get to pay 40 per cent tax, we also loose child benefit. How is that fair, by the time, ni deductions, tax reductions, loss of child benefit, we are no longer middle earners, we are low earners.

We get penalised, yet, we are expected to pay 40 tax over 40,000 to help who exactly???? as it isnt ourselves.

My husband works away, i work every hour i can, i can go three days without seeing my youngest child, because of my hours, she is at school when i go to work, and in bed when i get in. Yet we get penalised every direction.

Roberta1

A few questions:
1) Are non-guaranteed bonuses taken into consideration?

2)For those earning between £50-60k, with a salary sacrifice scheme and a non-guaranteed bonus, how on earth can you calculate whether you are entitled or not?

Confused!

FBaby

This brings a question of principles when it comes to step families. why is it acceptable for a a partner of a parent with care to see his taxes affected because of his partners children not his own yet the rules have been changed so that the salary of the partner of the non resident parent is protected for the calculation of maintenance. I think this is serious double standard. a nrp could not work and not have to pay a penny even though his partner could be earning over a 100k but a pwcp will be penalised if he earns over £50k

sly_dog_jonah

Quoting AirlieBird's post on p.1, which quoted HMRC:

Adjusted net income is calculated in a series of steps. The starting point is "net income" which is the total [1] of the individual’s income subject to income tax[2] less specified deductions, the most important of which are trading losses and payments made gross to pension schemes [3]. 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 [4]. 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

My interpretation is as follows:-

[1] Income includes salary, bonuses, rental income, taxable interest (non-ISA), dividends etc.

[2] Salary sacrificed isn't subject to income tax (or NI), so it's your salary after the gross childcare vouchers have been deducted that matters (assuming you signed up to CC vouchers before April last year, after which higher rate tax payers only got 20% relief). Likewise any pension contributions made via salary sacrifice will not count towards your income.

[3 & 4] if you make gross employee pension contributions via payroll which attract relief at source, this will reduce your adjusted net income. Likewise charity donations. For every £100 of gross contribution/donation, your net adjusted income is reduced by £100.

So if your salary is £55k and you make £200 gross donation to charity, 7.5% employee pension contribution and sacrifice £2860 for childcare vouchers, then I think your net adjusted income would be:

55000 - 7.5%*55000 - 200 - 2860 = 55000 - 7815 = £47185

Therefore someone in that situation wouldn't lose any CB, unless they had other income of >£2815, eg bonus, taxable interest, dividends, rental income.

If your net adjusted income does go above £50k, then your marginal rate will depend on the number of children your household claims CB for, as you lose 1% for every extra £100 of income.

For a 2 child family, the total CB is £1,752.40, so 1% is £17.52. Therefore for every extra £100 of salaried income you will be left with £40.48 after NI, Tax and loss of CB. A marginal rate of 59.5%. The more kids, the higher the marginal rate (by about 7% per child).

A household with 1 child would have a marginal rate of around 52.5%.

Taking it to the extreme, a family with 8 children would have a marginal rate of 101%, ie you'd be worse off if you earned more than £50k.

If your income does exceed £50k in a tax year, then on that's year's tax return you'd end up having to pay some of the CB back (if you claimed it in the first place). Alternatively HMRC may adjust your tax code. Since you don't know if you're income will drop and CB can't be claimed retrospectively, you should claim CB and set aside some of it for the tax bill if you think your income will exceed £50k.

Oh and if the earner is still repaying student loans via payroll, there's an additional 9% deduction on top.

There is an addition HMRC doc about Adjusted Net Income here: http://www.hmrc.gov.uk/incometax/adjusted-net-income.pdf

shedboy94

I've never seen so many people earning £50 / £60k moaning about losing BENEFITS in my life......do you honestly think it is a fair system that BENEFITS are paid to everyone regardless of income? If you think £60k is too low then what should the cut off be......or do you not think there should be one?
I'll do a deal.....I'll swap my lower salary, along with a 4 year min pay freeze, but receiving CB for your 60k salary..........no takers??

JimmyTheWig

jmfwilts wrote: »

So, my wife claims the Child Benefit. I think she earns under 50k. She doesn't know that I earn over 50k. To keep this the way I like things, she carries on claiming the benefit, but I pay more tax to payback the benefit for two kids. This sounds like it could be a nightmare to administer.

If she does earn over 50k and she doesn't want to tell me, who gets the adjusted tax code. HMRC are going to have to give it to one or the other, presumably the higher paid, thus potentially causing a confidentiality issue?

I presume that this is a fictional scenario, but I like it.
Yes, if you earn more than £50k and one of you earns child benefit and you are not taxed extra to account for the child benefit, then you can determine that your partner earns more than you.

JimmyTheWig

sly_dog_jonah wrote: »

Adjusted Net Income

My confusion with this term is that, to me, Net Income means income after income tax and NI.
But I don't think that this is what it means here, is it?

Is this, pretty much for most people, the same as Taxable Income?

sarahg1969

Surely this daft idea is going to cost more to administer than it will save? It would have been more sensible to scrap CB altogether, and simply up the level of tax credits to those on low incomes. That would cost nothing whatsoever to administer, and the CB department could be closed, saving a fortune in staffing costs and overheads. It's a much simpler idea.