Child tax credits + child benefit going.

Murgatroyd21

melly1980 wrote: »

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.

Ignorance is it? Because you can't get people to accept losing £380 through being on a high income is drastic and end of the world material? Another comedian. You just don't want to accept that once you go above a certain income figure there is no entitlement to certain benefits, and it can't be justified.

As pointed out, the OP isn't losing in excess if £1k from every £1k over £50k as the initial figures implied, they would only increase their household income by £580 instead of maintaining additional benefits over and above that.

To try to represent it as a loss, it would have been fairer to say they were only getting £580 in their pocket instead of £1370 for every additional £1000 earned over £50k. Doesn't look so good that way though, does it, so some overly complicated stats to try and support tears over not being entitled to CB & CTC when on a high salary.

I would heartily support the argument that household income above £50k shouldn't get CB, as it remains a ridiculous situation that one person in a house can get £51k and lose CB yet 2 people on £50k each can maintain it.

Murgatroyd21

Blue22 wrote: »

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

We are neither in a country full of scenario A's or B's, neither has it been shown that the OP is no better off through their work as we haven't been given actual figures from the start., although if you want to extend that imagining, try a third scenario, if we were all in a position to have salary paid by means of dividends or taxed at a 20% rate under capital gain through company rules or avoiding it altogether. So many variables, hmmm.

Imagine a country where your efforts and circumstances were recognised and rewarded equally, there wouldn't be a need for some of the shenanigans we see over tax and benefits.

melly1980

Murgatroyd21 wrote: »

Ignorance is it? Because you can't get people to accept losing £380 through being on a high income is drastic and end of the world material?.

nope, not because of that. Because you (and here is the key word) IGNORED yet again the difference between tax rate and effective tax rate despite it being spelled out to you.

There are two possible explanations for this.

1) Ignorance
2) Stupidity

Murgatroyd21

melly1980 wrote: »

nope, not because of that. Because you (and here is the key word) IGNORED yet again the difference between tax rate and effective tax rate despite it being spelled out to you.

There are two possible explanations for this.

1) Ignorance
2) Stupidity

Ah, is this the best you can do? You even missed the blatantly obvious Ignorantly Stupid, or Stupidly Ignorant!:rotfl::T

And you keep choosing to ignore it was wrong.

Additional Incoming Income
£!000 income
£410 tax credits
£380 child benefit
total £1790

Outgoing Income as a result of being above the threshold
£420 tax
£410 tax credits (can only be taken if TC in payment)
£380 child benefit (can only be taken if CB in payment)
total £1210
Therefore £1790 - £1210 = £580. Not 100% effective rate, is it?

If you need more information,please don't hesitate to ask.

Regards.

SkyeKnight

Murgatroyd21 wrote: »

Ah, is this the best you can do? You even missed the blatantly obvious Ignorantly Stupid, or Stupidly Ignorant!:rotfl::T

And you keep choosing to ignore it was wrong.

Additional Incoming Income
£!000 income
£410 tax credits
£380 child benefit
total £1790

Outgoing Income as a result of being above the threshold
£420 tax
£410 tax credits (can only be taken if TC in payment)
£380 child benefit (can only be taken if CB in payment)
total £1210
Therefore £1790 - £1210 = £580. Not 100% effective rate, is it?

If you need more information,please don't hesitate to ask.

Regards.

That is simply not how you calculate a marginal tax rate. There is no debate that if the OP earns an extra £1000 his total income (pay after tax + tax credits + child benefit) will be £210 lower - therefore the marginal tax rate is calculated to be 121%. That is the definition of a marginal or effective tax rate.

I've got a PhD in maths and I can tell you that you have got yourself into a right muddle and the figure you have calculated is just the normal income tax and NI rate (42%). The section for "Additional Incoming Income" is a mess - it should only be £1000. The Tax Credits and Child Benefit are not accrued per £1000 earned so it makes no sense to add them on here (otherwise why not add on some other benefits like Council Tax benefit or anything else you fancy and then subtract off some other random benefits too?)

I do think it is a reasonable position to take in a debate that a person on a high salary does not deserve benefits. Attempting to redefine a mathematical equation is a very bad idea and doesn't help your debate - there aren't many debates on redefining Pythagorus's theorem on here because there is nothing to debate. Similarly calculating marginal tax rate is a maths equation and in this case it is 121% over £50k.

Murgatroyd21

SkyeKnight wrote: »

That is simply not how you calculate a marginal tax rate. There is no debate that if the OP earns an extra £1000 his total income (pay after tax + tax credits + child benefit) will be £210 lower - therefore the marginal tax rate is calculated to be 121%. That is the definition of a marginal or effective tax rate.

I've got a PhD in maths and I can tell you that you have got yourself into a right muddle and the figure you have calculated is just the normal income tax and NI rate (42%). The section for "Additional Incoming Income" is a mess - it should only be £1000. The Tax Credits and Child Benefit are not accrued per £1000 earned so it makes no sense to add them on here (otherwise why not add on some other benefits like Council Tax benefit or anything else you fancy and then subtract off some other random benefits too?)

I do think it is a reasonable position to take in a debate that a person on a high salary does not deserve benefits. Attempting to redefine a mathematical equation is a very bad idea and doesn't help your debate - there aren't many debates on redefining Pythagorus's theorem on here because there is nothing to debate. Similarly calculating marginal tax rate is a maths equation and in this case it is 121% over £50k.

Thanks for the info, but to be honest, I don't care if you've got a mirror that tells you porkies every time you look in it.

You keep insisting in claiming tax credits and child benefits withdrawals are applied to the £1000 income. They aren't. They are applied to the benefit the person may get. Tax and NI deductions are applied to income, reduction in TC is applied to TC (at a 41% withdrawal rate) and reduction in CB is applied to CB payments (10% withdrawal rate).

To simplify it for you, you have to be getting tax credits to have a reduction in tax credits. The 41% withdrawal rate simply isn't applied to the £1000 income.

The same applies to Child Benefit. You have to be getting it to have a reduction.

To apply all the reductions against the £1000 income is just ludicrous. You need to add the amount of tax credit and child benefit being received to get a true reflection of the financial position.

In the OP's case, with 5 children, 2 of whom are disabled, the tax credits in payment would actually be @ £50k they would get £6687pa, if the income increases the following year to £51k they would get the same tax credit figure. There's a £10k disregard that means they could benefit from an increase for a year before any impact. Counting a reduction that only applies 12 months later is misleading and deliberately skewing the figures, but then again, you only have a PhD in maths, not tc or, apparently, common sense.

Tax credits would continue above an income of £60k in the circumstances stated, so never completely withdrawn until earnings in excess of £63000.

Depends how you want to calculate it, doesn't it. Based on actual circumstances or made up ones. In fact, if you look at total deductions for tax & NI on an income before any benefits of £51k = £14641. For £60k it's £18421. Doesn't amount to 42% does it? Because the applicable rates only apply to specific parts of income even for tax & NI. Something else deliberately ignored in all this hooha.

Murgatroyd21

To go back to the aims of the forum, i.e. give advice on entitlement. OP, if your income for 2011/12 was £50k, if you carry on and earn up to an additional £10k you will lose the CB of about £950 in 2012/13. You would have increased your net income by about £5970. Take away the £950 you lose from January still gives an increase of £7870 this year (2012/13)

Your tax credits will be unaffected until next year because the increase is within the threshold, and as you say it's only because you do additional hours your income goes over £50k, by going back to the normal hours/income of £50k from April 2013, you will get the additional CB back and tc will remain unaffected, possibly increased by future child element increases!

You can do a similar exercise in future years, although bear in mind the tc increased income threshold is reducing to £5k, so you would need to be within that figure, until and unless other changes are introduced by the government.

zagfles

Murgatroyd21 wrote: »

Thanks for the info, but to be honest, I don't care if you've got a mirror that tells you porkies every time you look in it.

:rotfl:Are you still digging??

You keep insisting in claiming tax credits and child benefits withdrawals are applied to the £1000 income. They aren't. They are applied to the benefit the person may get. Tax and NI deductions are applied to income, reduction in TC is applied to TC (at a 41% withdrawal rate) and reduction in CB is applied to CB payments (10% withdrawal rate).

So what? Nobody cares what the deduction is applied to.

To simplify it for you, you have to be getting tax credits to have a reduction in tax credits. The 41% withdrawal rate simply isn't applied to the £1000 income.

The same applies to Child Benefit. You have to be getting it to have a reduction.

To apply all the reductions against the £1000 income is just ludicrous.

You do really understand marginal deduction rates, don't you? Just like everyone else on this thread. Why are you pretending to be stupid?

You need to add the amount of tax credit and child benefit being received to get a true reflection of the financial position.

No you don't. The MDR is calculated by reflecting the change in financial position by virtue of a change in income. It's the change that matters not the original postion. But you know that don't you? Someone summed it up perfectly earlier;):

Originally Posted by Murgatroyd21
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

As you can see, earned income increases result in a total net income drop in the 50-60k range. Or are they "misleading or skewed" figures:rotfl:

In the OP's case, with 5 children, 2 of whom are disabled, the tax credits in payment would actually be @ £50k they would get £6687pa, if the income increases the following year to £51k they would get the same tax credit figure. There's a £10k disregard that means they could benefit from an increase for a year before any impact. Counting a reduction that only applies 12 months later is misleading and deliberately skewing the figures, but then again, you only have a PhD in maths, not tc or, apparently, common sense.

Who said his income was £50k last year?

Tax credits would continue above an income of £60k in the circumstances stated, so never completely withdrawn until earnings in excess of £63000.

Bzzt wrong. About £75000 in your imaginary scenario.

Depends how you want to calculate it, doesn't it. Based on actual circumstances or made up ones.

Like the OP earned £50k last year? Your imagination is running wild.

In fact, if you look at total deductions for tax & NI on an income before any benefits of £51k = £14641. For £60k it's £18421. Doesn't amount to 42% does it? Because the applicable rates only apply to specific parts of income even for tax & NI. Something else deliberately ignored in all this hooha.

You seem to have omitted tax credits and child ben from the above. Never mind. I think we all understand you.

Looking forwards to the next one:T

zagfles

Murgatroyd21 wrote: »

To go back to the aims of the forum, i.e. give advice on entitlement. OP, if your income for 2011/12 was £50k, if you carry on and earn up to an additional £10k you will lose the CB of about £950 in 2012/13. You would have increased your net income by about £5970. Take away the £950 you lose from January still gives an increase of £7870 this year (2012/13)

Erm, what? An extra £10k in overtime on a basic £50k would result in tax/NI of £4200 plus the £950 ch ben loss, which would give a net increase of £4850.

Your tax credits will be unaffected until next year because the increase is within the threshold, and as you say it's only because you do additional hours your income goes over £50k, by going back to the normal hours/income of £50k from April 2013, you will get the additional CB back and tc will remain unaffected, possibly increased by future child element increases!

Indeed - a valuable lesson in how to make maximum use of the disregard! This is getting towards advanced level of taking the p**s out of the system:)

Though it's not as good as it was a few years ago, with a £25k disregard for increases and no disregard for reductions. Making large pension contributions in alternate years was well worth doing then!! Still is now to some extent.

You can do a similar exercise in future years, although bear in mind the tc increased income threshold is reducing to £5k, so you would need to be within that figure, until and unless other changes are introduced by the government.

Yes. With the disregard of £2500 for income drops too, it will soon not be worth trying to take advantage of the disregard when manipulating income.