Payrise takes OH's income over £50k

angelavdavis

I know a lot people earn a lot less and really don't know how people manage. But I would like some advice as my husband has been fortunate enough to recently get a £1500 payrise, taking his income just over the £50k limit.

We adopted toddler siblings in February this year, and so we are fairly new to child benefit, etc. I had to give up work at the insistence of Social Services when we adopted until the children are in full time education, so our household income has now halved. The cost of living in the South East is so high now that my retired parents, both with low pension provision (just above the limit for pension credits), couldn't afford to continue living on their own so also live with us. As you can appreciate, the £50k has to stretch quite a way.

I understand that, come April 2013, we will no longer qualify for child benefit (worth over £1600 per annum to us) because of this payrise. When I originally applied for the child benefit, I foolishly thought I would have the luxury of putting the money away for the children, but realistically, our bills have increased so much that the money has been swallowed up (and I am pretty good at budgeting).

When OH came home pleased about his income increase, I realised the implication - that, after tax, my husband's payrise will result in us being over £700 per year worse off! I asked OH to find out if his company gave childcare vouchers instead of income as this could help me to find part time work, but they don't.

Personnel have recommended he instead puts his payrise into his pension - implying that this would help in this situation as his net pay would be lower. However, am I right in thinking that the income will be judged on the gross income - therefore this recommendation won't help at all?

I am not au fair with benefits so would appreciate it if someone could confirm whether or not my thinking is correct and if we have any way (other than giving back the payrise) or avoiding this predicament.

Thanks for your help.

danielanthony

Do a salary sacrifice, if his company allows it. The company pays directly into the pension, reducing the employees salary accordingly, this saves tax and NI contributions but not all companies run this scheme.

angelavdavis

Thanks for this Daniel. Is this correct? I will find out if this is possible at OH's work.

EvieSaver

Child benefit is removed at a rate of 1% per £100 over £50,000, resulting in the whole amount being lost at earnings of £60,000. It is lost in the form of extra tax.

So if the pay rise only pushes you a little over the £50,000 then you will only loose a bit of the child benefit. I think for 2 children you receive about £1760, so you loose £17.60 (ish) for every £100 your husband earns over £50,000.

This comes into effect from 7 January 2013. From January - Apr 2013 your entitlement to CB will be based on your adjusted net earnings for Apr 2012-2013.

From then on, the amount of child benefit you are entitled to in a tax year is calculated by the amount your husband earns in that tax year (not always something known in advance).

You need to check if you are over the £50,000 as it is not calculated on gross income but adjusted net income which means some figures can be deducted from your gross salary. I think this includes payments into a pension. If your husband already pays into a pension then adjust his salary by this amount to see if you are still over the £50k.

You could also check on the HMRC web site before making any salary sacrifices which may be unnecessary and could leave you worse off.

Tigsteroonie

angelavdavis wrote: »

The cost of living in the South East is so high now that my retired parents, both with low pension provision (just above the limit for pension credits), couldn't afford to continue living on their own so also live with us. As you can appreciate, the £50k has to stretch quite a way.

I see you are mortgage free, so that is one less expense to worry about. Do your parents contribute at all to the household income? (After all, they have no accommodation costs now.) As you have already pointed out £50k, even after tax is deducted, is still much more than some other MSE households have ... Have a look around other forum areas such as Old Style to get information on how others manage and ideas on how to lower your expenditure to compensate for the drop in income.


:wave: Hello Stalkers :cool:

PippaGirl_2

I'm surprised that the social services didn't offer an adoption allowance if they were insisting you give up work for a number of years rather than the normal 6 months. Adoption should not leave someone worse off is the status operandi within adoption. I think you got a raw deal. Any chance of approaching post adoption support?

xylophone

http://www.thisismoney.co.uk/money/pensions/article-2192562/Trick-avoid-losing-child-benefit-boost-pension.html

sleepless_saver

This HMRC link describes how adjusted net income - which is the income used in the calculation of child benefit after the 2013 changes - will be worked out. Pension contributions are deducted, but the way that works depends on whether pension tax relief is deducted at source or not.

Incidentally, if you don't claim child benefit you won't get national insurance contributions credited while you are not working.

Poppie68

Surely someone on 50k would not miss £57 per month, because thats what you will loose if you say you will £700 a year worse off?

princessdon

Poppie68 wrote: »

Surely someone on 50k would not miss £57 per month, because thats what you will loose if you say you will £700 a year worse off?

of course they may, higher wages often equate to higher outgoings. For many the loss of CB is the same as those who now have to pay for CTB.

Some *may* not feel the loss as much (especially if they don't have large housing costs), but for others the loss of CB will mean an adjustment.

Eg my friend is a single father (his wife died 3 years ago). After mortage, CTB and childcare he is left with £121 a month to feed, clothe and get to work. CB feeds his children currently, he will still get CB as earns pennies under the £50K, but this money for his 4 children pays their food.

I appreciate others may not have such a tight budget and pay as much in childcare etc, but please don't assume that everyone who earns £50K can afford the loss. Especially when a single parent on minumum wage of 16 hours a week would have nearly £400 more per month in benefits/wages than he gets after Tax/NI.

[Deleted User]

are we beginning to see the start of the middle class backlash against benefits cuts?I really do hope so
as for not being able to manage on a 50k salary god help most of us