MSE News: Budget 2012: what the child benefit overhaul means for you

Former_MSE_Helen

This is the discussion thread for the following MSE News Story:

"The Chancellor partly reversed a cut in child benefit, but there is still plenty of confusion. See our Q&A for help..."

Read the full story:
Budget 2012: what the child benefit overhaul means for you

davebush

Is the £50,000 after all the normal tax allowances, as with the 40% rate, or is it on the grosss income?

sly_dog_jonah

Useful Q&A worth adding:

Do benefits in kind (eg private healthcare, company cars) count towards income?
Do salary sacrifice pension contributions affect the income?
Do salary sacrifice childcare vouchers affect the income?
How are non-salary sacrifice employee pension contributions treated?

These all relate to the 'adjusted net income' which HMRC referred to yesterday in the budget documents. Some authoritative answers would be good, but some forumites have already had a stab at answering them in this thread:

http://forums.moneysavingexpert.com/showthread.php?t=3863117

JimmyTheWig

Question: How will this work being introduced in January when a tax year runs from April?

benood

I reckon this means that my marginal tax rate becomes 70% between £50 and £60k (4 children).

Nice work George!

sly_dog_jonah

benood wrote: »

I reckon this means that my marginal tax rate becomes 70% between £50 and £60k (4 children).

Nice work George!

I make it 73.47% for a 4 child family: 40% tax, 2% NI, 10.56% lost CB for first child, 6.97% lost for each additional child. Oh and an extra 9% if you're still paying back student loans.

benood

sly_dog_jonah wrote: »

I make it 73.47% for a 4 child family: 40% tax, 2% NI, 10.56% lost CB for first child, 6.97% lost for each additional child. Oh and an extra 9% if you're still paying back student loans.

Oh no even worse, why do I bother

mmillie

sly_dog_jonah wrote: »

I make it 73.47% for a 4 child family: 40% tax, 2% NI, 10.56% lost CB for first child, 6.97% lost for each additional child. Oh and an extra 9% if you're still paying back student loans.

Many people get bonuses in the form of company shares. However, if you are taken over 50k by employee share options, you are also generally liable for employers NI, meaning you also pay 13.8% employers NI. So for every £100 in stock options that you get, you will loose;

£13.80 employers NI
£34.48 income tax (40% of the amount less employers NI)
£2 national insurance (2% on the full amount)
£31.47 child benefit loss
£9 student loan repayment

leaving you with £9.25. So your marginal rate of tax in those circumstances is almost 91%. The good news is that it drops down again after £60k, but then goes back up again at £100k when you start to loose your personal allowance, taking your marginal rate of tax back up to 91% for the next 20k, before dropping again at £120k, and rising modestly at £150k.

This random large up down up down nature of the marginal tax rate
can't be good for the country. Anyone near these borders is just going to work a bit less because it's just not worth the extra effort, and the government will loose out on tax. Why bother earning £60k rather than £50k if you only take home £1000 more. Better to take 7 weeks unpaid leave, earn £10000 less, and it'll cost you a pittance.

Martin

Bokc

If a father earns £65K (net, self employed) per year but pays his ex wife £30K in maintenance, does that mean his new partner is in effect (due to the income tax clawback if child benefit over £60k) barred from receiving child benefit? Despite the fact that the "second family" income contribution from the father is in fact £35K? Does it make any difference whether or not they are married? Will the ex-wife be penalised as well as the current partner?

michaels

For Jan-Mar 13 it seems that the whole of your 2012/13 income will be assessed rather than being prorated so anyone earning over 53,333 will lose all their child benefit for this period...nuts?!

3under3

I understood that it would take in to account all of your income for 2012/13, but only the child benefit received between 07/01/12 and the end of the 2012/12 tax year. So if you earned 51k you would lose 10% of the child benefit received between 07/01/12 and the end of the 2012/12 tax year. Is that right?