Child tax credits + child benefit going.

zagfles

Murgatroyd21 wrote: »

Gross 50k Net 35778 TC 6687 Total 42465 CB 3800 w/CB 46265
Gross 51k Net 36358 TC 6277 Total 42635 CB 3420 w/CB 46055
Gross 52k Net 36938 TC 5867 Total 42805 CB 3040 w/CB 45845
until
Gross 60k Net 41578 TC 2587 Total 44165 CB 0 w/CB 44165

Thank you for confirming what we've been saying. The OP loses £210 for every £1000 he earns over £50,000.

Assuming the OP earns £60k he's be mad not to invest £10k in a pension, as he'd gain £2100 and get £10k pension savings completely free!

And before anyone even thinks about moralising about doing this - consider this. A couple with no kids earning £30,000 each ie the same gross household income as the OP, will have a higher net income than the OP would have.

Their net would be £45864 to support two people, whereas the OP would have £44165 to support 7 people!

So I would strongly recommend this course of action to anyone in the OPs position, and to ignore any moralising about it. It's perfectly legal, pension contributions are tax deductible, they are tax credits deductible, and they will soon be child benefit deductible.

At least it will encourage people to save for their old age!

Murgatroyd21

He hasn't "lost" anything, just stopped being entitled to as much additional state benefits due to the increased income.

He has an option of increasing the continuation of state benefits by making additional payments to a pension scheme to reduce paye income taken in to account for benefit calculations. As you say, a legal avoidance scheme. Or he could get his partner to go out and work for more income.

Why shouldn't 2 people working potentially 74 hours per week not have a higher net income than someone working 37 hours?

Your avoiding taking in to account the fact the applicable tax rate in each scenario you present is different. In one scenario 1 earner is on higher rate tax, in the other both are on a lower tax rate. Are you saying the tax rate on all people in a household should be based on total household income rather than individually earned incomes?

The OP has chosen to have 7 to support, could have kept it at 2 if he had wanted. Or didn't he think there might be cost implications?

As for moralising about it, isn't this why the CB was reduced from people on incomes above certain levels? That it was morally unsustainable? There's still the situation that households with higher incomes continue to get the CB, but you can take that up with the government.

Tax avoidance and evasion schemes are coming under more scrutiny because there's an expectation that a moral as well as legal acceptance is being brought to bear.

As for making people save for the future, well, they could have expected a certain amount of tax relief in the way of an increased rate, but that has changed (which you've already stated you agree with) so unless the pension provides either below or above a certain amount there will be added tax to pay from now on.

zagfles

Murgatroyd21 wrote: »

He hasn't "lost" anything, just stopped being entitled to as much additional state benefits due to the increased income.

What is it with you, do you just want to discuss semantics? "Stopped being entitled to" = "lost".

He has an option of increasing the continuation of state benefits by making additional payments to a pension scheme to reduce paye income taken in to account for benefit calculations. As you say, a legal avoidance scheme. Or he could get his partner to go out and work for more income.

I would imagine she has her hands full with 5 kids, 2 of which are disabled. I think my option is better, but that's for the OP to judge.

Why shouldn't 2 people working potentially 74 hours per week not have a higher net income than someone working 37 hours?

Or they might be doing exactly the same job at exactly the same pay rate as the OP, just half the hours each. Why should they get more?

Your avoiding taking in to account the fact the applicable tax rate in each scenario you present is different. In one scenario 1 earner is on higher rate tax, in the other both are on a lower tax rate. Are you saying the tax rate on all people in a household should be based on total household income rather than individually earned incomes?

Absolutely. They do in most other civilised countries. In France, for example, I believe the OP would be entitled to 6 tax allowances and 6 times wider tax bands, to reflect the fact that his salary supports 7 people. He'd pay much, much less tax than here. In the US he would have the choice of being assessed singly or jointly and get tax allowances for children.

Here no account of taken of dependants in the tax system, we have the hypocrisy of independant assessment for tax, but joint assessment for benefits. Which basically screws single earner families. So when they can claim "state help" they are only getting a refund of the excessive tax they are forced to pay. So using that "state help" is no worse than using tax allowances in other countries. Which people never seem to whinge about.

The OP has chosen to have 7 to support, could have kept it at 2 if he had wanted. Or didn't he think there might be cost implications?

You could say the same about those on low incomes who have lots of children. But that would be getting judgemental, wouldn't it? This forums is to discuss entitlement, not judgement. As Martin says in his sticky.

As for moralising about it, isn't this why the CB was reduced from people on incomes above certain levels? That it was morally unsustainable? There's still the situation that households with higher incomes continue to get the CB, but you can take that up with the government.

Tax avoidance and evasion schemes are coming under more scrutiny because there's an expectation that a moral as well as legal acceptance is being brought to bear.

Making pension contributions is hardly a fiendishly clever tax avoidance scheme of the sort the govt are looking to clamp down on. Pension contributions are specifically allowable for tax, tax credits and now child benefit purposes, within prescibed limits. The govt could easily have changed the tax, tax credits and child ben rules to not allow pension contributions to be deductible, but they haven't. So using an allowance which the govt have specifically allowed is no more of a tax avoidance scheme than using the full ISA allowance.

As for making people save for the future, well, they could have expected a certain amount of tax relief in the way of an increased rate, but that has changed (which you've already stated you agree with) so unless the pension provides either below or above a certain amount there will be added tax to pay from now on.

I haven't got a clue what you're on about here. If you're saying the pension will be taxed, yes most of it will be (25% will be tax free), but it's not going to be taxed at 120%! Even if it reduces benefits in retirement (which it seems unlikely would be the case with the OP).

So in all likelyhood the OP will be taxed at about 15% on his additional pension contributions, but they cost him nothing (in fact they saved him 21%!!)

Murgatroyd21

"Stopped being entitled to" = "lost". In your book. As I said earlier, and you keep ignoring, it is a benefit payment over and above earned income. Just a smaller amount as the income increases.

I would imagine she has her hands full with 5 kids, 2 of which are disabled. I think my option is better, but that's for the OP to judge. Lots of people have their hands full with children, or would prefer simply to be at home with them. The point of the OP's post was identifying a reduction in income coming in, albeit from state benefits, as his own income increased. If the household needs more, working for it seems reasonable as the children will need to attend school at some time, and help with childcare costs are available as the tax credits, in this scenario, run on with income over 60k.

Or they might be doing exactly the same job at exactly the same pay rate as the OP, just half the hours each. Why should they get more? Perhaps if you clarify your imaginary friends position better in future we'll all know what circumstances we're supposedly dealing with.

Absolutely. They do in most other civilised countries. Uh, we're in the UK. If he prefers the 'benefits' of living in another 'more civilised' country, that remains an option I suppose.

Here no account of taken of dependants in the tax system, we have the hypocrisy of independant assessment for tax, but joint assessment for benefits. Which basically screws single earner families. So when they can claim "state help" they are only getting a refund of the excessive tax they are forced to pay. So using that "state help" is no worse than using tax allowances in other countries. Which people never seem to whinge about. Lol, take a breath and put yer hair back on! I think you'll find there's enough people whinge about all and everything related to taxes and benefits in this country. Does that make us more civilised yet?

You could say the same about those on low incomes who have lots of children. But that would be getting judgemental, wouldn't it? This forums is to discuss entitlement, not judgement. As Martin says in his sticky. Who's getting judgemental? You introduced the comparison between a couple with children and a couple without, then complained that there's a hit in finances when some benefits end. Not allowed to point out that it would be reasonable to expect a financial burden along the line? Ho hum.



I haven't got a clue what you're on about here. I can understand that. Still you did say "I never understood why over 65's got a higher tax allowance in the first place"

You have your own particular view to the reduction in CB paid to higher tax payers, I have mine. You want to paint it as some sort of tax hit and surround it with % stats and compare us to any other country in the world, I see it as a lowering of state aid at a point it's been decided higher income earners shouldn't be getting it. We are never going to meet in the middle on this, so pointless going on as a result.

You've already given advice on how the benefits can be legally maintained, I'm sure the OP will have benefited from that advice.

zagfles

Murgatroyd21 wrote: »

I haven't got a clue what you're on about here. I can understand that. Still you did say "I never understood why over 65's got a higher tax allowance in the first place"

Oh I see, it was a comment I made in a different thread, and which is totally irrelavant to the issue we're discussing here.

You have your own particular view to the reduction in CB paid to higher tax payers, I have mine. You want to paint it as some sort of tax hit and surround it with % stats and compare us to any other country in the world, I see it as a lowering of state aid at a point it's been decided higher income earners shouldn't be getting it. We are never going to meet in the middle on this, so pointless going on as a result.

You've already given advice on how the benefits can be legally maintained, I'm sure the OP will have benefited from that advice.

Indeed, and I will give the same advice to anyone else who asks here. If people like you get hot under the collar about it, tough

nervousfrog

Thanks for the responses.

@Murgatroyd21. It's not about trying to avoid additional taxable income in order to maintain certain levels of state benefit as my income without a bonus or overtime minus pension contributions etc is below £50k.

It just means next time my boss asks me to do overtime I am better saying no thanks I would rather spend the day at home with my kids as I have no reason to come to work and every reason to stay at home if the business suffers as a result of it, not my problem. I will just remind him were all in it together.

Murgatroyd21

nervousfrog wrote: »

Thanks for the responses.

@Murgatroyd21. It's not about trying to avoid additional taxable income in order to maintain certain levels of state benefit as my income without a bonus or overtime minus pension contributions etc is below £50k.

It just means next time my boss asks me to do overtime I am better saying no thanks I would rather spend the day at home with my kids as I have no reason to come to work and every reason to stay at home if the business suffers as a result of it, not my problem. I will just remind him were all in it together.

What, you mean the same approach as people who, faced with NMW rates, transport and CC costs, might want to say to their bosses and see if they can get by with a bit of help from the state instead and be with their families? Best of luck to you.

nervousfrog

Thanks for your views. I'm sure you go to work fo free. I wish I could afford to I certainly would not work 24*7 365 days a year shifts.

melly1980

zagfles wrote: »

I wrote effective tax rate.
.

what amazes me is that the same ignorance was used by the same person on a separate thread and has had it explained in simple English.

Blue22

Murgatroyd21 wrote: »

What, you mean the same approach as people who, faced with NMW rates, transport and CC costs, might want to say to their bosses and see if they can get by with a bit of help from the state instead and be with their families? Best of luck to you.

Hi Muratroyd

From your posts you are obviously a very intelligent person so it amazes me that you dont differentiate between two very different situations.

Household A
The OP's household. Even if he keeps his income at under £50K, the effect of tax and NI paid minus all benefits recieved will mean that this household will be making a nett contribution of over £3.5K to the treasury per annum.

Household B
A self employed single parent, working 16 hours a week, whose circumstances you commented on a few days ago. https://forums.moneysavingexpert.com/discussion/3882515
You said
'not much of an incentive to give up time with a child for really, to be no better off. Better off getting the time with your child while maintaining your entitlement'
Even if this lady had only one child then the nett cost to the treasury is likely to be at least £15K

Imagine a country where we are all Household As, then imagine a country where we are all Household Bs. Where would you chose to live?

My simple utilitarian reseasoning tells me that there is a big difference between the 'approach' of these two families