More confused than ever about child benefit taxation after talking to HMRC!

dori2o

waccamole wrote: »

Sorry if I'm being dense - but then again if it's that simple why can't HMRC give me a straight forward answer

I think it was the pensions stuff that was confusing me. I think I've got it now.

Your explanation above is far better than anything on the HMRC website.

Now to see if that's what is actually implemented...

Because as per usual the information coming down to the people on the phone and in the enquiry centres not only contradicts itself, but it makes absolutely no sense at all.

it's hard for people to give the correct information when those in charge of giving the information don't have a clue and send out updates that make no sense.

Essentially this is what will happen.

Child benefit will continue to be paid direct to the main carer of the children as it is now, at the full amount.

From January, those identified as being in a household where 1 or both of the parents registered for child benefit is expected to receive an income of more that £50k will receive a revised tax code that will claw back the amount of child benefit that is not due to be paid. This will be issued to the highest earner in the household.

The 'net adjusted income' will be your taxable income on your P60, or if you make extra payments to a private pension scheme, gift aid, need to make expenses claims or pay to certain subscriptions to unions/governing bodies etc, you income after these deductions have been taken into account.

The quick way to calculate the deduction from the code is as follows.

amount over £50k divded by 10,000

x annual Child Benefit paid (not what is due but what is paid)

divided by your highest level of income tax.

So for someone with a net adjusted income of £58500 claiming child benefit for one child will be due to receive £158.34 of child benefit (1055.60 less 85%), but will receive into their nominated bank account the full £1055.60

Therefore HMRC needs to claw back 897.26 or as close to as possible.

So.

8500 / 10000 = 0.85

x 1055.6 = 897.26

/ 0.4 = 2243.15

reduction to tax code to collect Child Benefit

2243

2243 x 40% = £897.20.


Please don't forget however that for the current tax year this will only apply for the period 7th January to 5 April and the amount of child benefit received/due in that period.

chrismac1

Whoever says Osborne doesn't even know the time of day is wrong - he doesn't even know the time of year!

zagfles

dori2o wrote: »

Because as per usual the information coming down to the people on the phone and in the enquiry centres not only contradicts itself, but it makes absolutely no sense at all.

it's hard for people to give the correct information when those in charge of giving the information don't have a clue and send out updates that make no sense.

Well I understand it perfectly well from publicly available information, all of which is available to those whose job it is to understand these things and give people correct advice. You seem to understand it perfectly well too.

There's really no excuse for HMRC staff to be telling the OP the bulls**t they told him.

chrismac1

For once I have a great deal of sympathy with HMRC staff. The rules and procedures on this are being made up on the hoof, and appear to change every 2 weeks. Hence the accountancy bodies have told the Government they think the plans for January 13 are pretty much unworkable.

Of course, it's full steam ahead on the bridge of the Titanic. Which puts the poor lokouts - in the shape of frontline HMRC staff - in a more or less impossible situation.

zagfles

chrismac1 wrote: »

For once I have a great deal of sympathy with HMRC staff. The rules and procedures on this are being made up on the hoof, and appear to change every 2 weeks. Hence the accountancy bodies have told the Government they think the plans for January 13 are pretty much unworkable.

Of course, it's full steam ahead on the bridge of the Titanic. Which puts the poor lokouts - in the shape of frontline HMRC staff - in a more or less impossible situation.

So what's new? This will be a breeze compared to tax credits, remember all the problems in the first few years of tax credits?

The complications in this change will come from situations like definition of partner, like what happens when couples split/get together mid tax year etc. The OPs situation is straighforwards, there's no excuse for HMRC giving him the wrong answer, it's all publicly available information. For them to state it'll be taxed like a company car benefit is sheer incompetance.

xylophone

http://www.thisismoney.co.uk/news/article-2221638/Child-benefit-cuts-heading-chaos-Reforms-complicated-taxman-explain-them.html

I have just noticed this article.

dori2o

zagfles wrote: »

So what's new? This will be a breeze compared to tax credits, remember all the problems in the first few years of tax credits?

The complications in this change will come from situations like definition of partner, like what happens when couples split/get together mid tax year etc. The OPs situation is straighforwards, there's no excuse for HMRC giving him the wrong answer, it's all publicly available information. For them to state it'll be taxed like a company car benefit is sheer incompetance.

It all depends on what was the context of that statement, and as none of us but the OP was privvy to the conversation we can only summise what was meant and whether the OP has fully understood what was said.

For instance, the adviser could have been trying to explain that like with a car benefit or other BIK, the tax free allowances will be reduced by way of a restriction in order to collect the extra tax due.

Some people try and over explain things which can cause confusion. it doesn't mean that the person doesn't understand the subject.

Then again, just because some people can decifer the garbage being handed down from up high, doesn't mean everyone can, and for those who have been in the revenue long enough to remember the childrens tax credit restrictions for those earning over 40%, it makes it a little easier to work it out yourself rather than trying to work out what an internal memo says.

I fully expect to receive more garbled messages and contradictions before January on this subject.

zagfles

dori2o wrote: »

It all depends on what was the context of that statement, and as none of us but the OP was privvy to the conversation we can only summise what was meant and whether the OP has fully understood what was said.

For instance, the adviser could have been trying to explain that like with a car benefit or other BIK, the tax free allowances will be reduced by way of a restriction in order to collect the extra tax due.

OK fair enough, it could be the OP misunderstanding, but he was left with the impression child benefit would be added to his income and taxed (ie he'd only lose 40% max of it) rather than the tax code fiddled to collect the amount due (as you described).

Some people try and over explain things which can cause confusion. it doesn't mean that the person doesn't understand the subject.

Then again, just because some people can decifer the garbage being handed down from up high, doesn't mean everyone can, and for those who have been in the revenue long enough to remember the childrens tax credit restrictions for those earning over 40%, it makes it a little easier to work it out yourself rather than trying to work out what an internal memo says.

I can imagine the internal memos being rubbish, especially as the letters HMRC send out to customers are often complete rubbish. There've been 2 cases in the last 12 months where HMRC have told people claiming tax credits complete rubbish, such as they won't get tax credits if they earn over £26k (this was sent to people with more than 1 child and is blatently wrong, I got MSE to do a news article about this). Also they got the figures wrong on the auto renewals this year.

But people working for HMRC surely will read the budget documents, and HMRC's own website and guidance, that will give them the basics of how it works. So if some interal memo contradicts the basics, such as the OP describes, it should be spotted quickly surely.

EvieSaver

I've just rang the HMRC child benefit help line 0845 302 1444 to get this cleared up.

I asked

"If someone was earning £60,000 would they have to repay the whole amount of child benefit received or would they be taxed on the amount of child benefit received, e.g. at 40% of the amount received"

The answer was

"Only preliminary information has been released so far and some of it is wrong. All we know is that there will be a tax charge on the full amount but we don't know yet at what rate (eg, 40% or 100%)". The first letters will be received on 3rd November and there will be a link on the HMRC website from around this date.

I was not told what information is wrong.

So, I cleared that up no end.:rotfl:

zagfles

EvieSaver wrote: »

I've just rang the HMRC child benefit help line 0845 302 1444 to get this cleared up.

I asked

"If someone was earning £60,000 would they have to repay the whole amount of child benefit received or would they be taxed on the amount of child benefit received, e.g. at 40% of the amount received"

The answer was

"Only preliminary information has been released so far and some of it is wrong. All we know is that there will be a tax charge on the full amount but we don't know yet at what rate (eg, 40% or 100%)". The first letters will be received on 3rd November and there will be a link on the HMRC website from around this date.

I was not told what information is wrong.

So, I cleared that up no end.:rotfl:

Are HMRC now staffed with utter morons, or have they got a mole trying to sabotage things :rotfl:

I can understand confusion about some aspects of this change. What is "adjusted net income" exactly. What happens when partners get together/split mid tax year. What is a "partner". What happens if one partner refuses to tell the other how much child ben they get. Etc.

But the percentage of the charge was made blatently clear in the budget and the finance bill.

http://www.hm-treasury.gov.uk/d/fb2012_ootlar.pdf

http://www.legislation.gov.uk/ukpga/2012/14/schedule/1/enacted

The charge is 1% of the child ben received for every £100 earned over £50,000. It is 100% for incomes of £60,000 or more.

Some aspects of tax are hard. This isn't. I would suggest anyone who is incapable of issuing a correct memo on this aspect of the change is immediately sacked for incompetance! It's their job to understand, they've had 7 months to understand it. How will they ever cope with any complex piece of tax legislation if they can't understand this?