Whats the differences between CSA 2 vs the newer 'gross income scheme'

RedSky

Alpine wrote: »

The OPs original question was what are differences between CSA2 (net pay) and CSA3 (gross pay) schemes.

With CSA2, an increase in taxation would reduce the amount paid in maintenance as the percentage was calculated after tax was deducted.

With CSA3, maintenance is calculated on your gross pay. So your maintenance remains the same even if the government increase the amount of tax you pay.

I see what you mean. So NRPs benefit on CSA3 when income tax is decreased.

Alpine

RedSky wrote: »

I see what you mean. So NRPs benefit on CSA3 when income tax is decreased.

Correct. But the state of the public finances and the size of the welfare state mean I don't think we'll be seeing tax rates heading south any time soon.

PreludeForTimeFeelers

Alpine wrote: »

You're wrong. Everyone pays the same on the first £800 per week. That's an annual salary of £41,600. Much higher than the average.

Some basic calculations on a £25,000 salary for someone with 3 children:

CSA2

£25,000 Gross is
£17,493 Net x 25% =
£4,373 CSA

CSA3

£25,000 Gross x 19%=
£4,750 CSA

So that's an increase of £377 a year or 8% for an average earner.

Nope, it's you who is wrong.

Using listentotaxman to work out the tax values, a gross wage of £25,000 gives you a net wage of £19,532.04. If we break these down into weekly figures, that's £480.77 gross, or £375.62 net.

CS2: 25% of £375.62 = £93.91 which would be rounded to a weekly liability of £94
CMS2012: 19% of £480.77 which gives you a weekly liability of £91.35, which would be rounded down to £91.

So using your figures, an NRP earning £25k a year, with 3 kids, would be £3 per week better off.

Annual figures would be approx £4883 vs £4750 - a reduction of about 3%, rather than your quoted 8% increase.

RedSky

Alpine wrote: »

Correct. But the state of the public finances and the size of the welfare state mean I don't think we'll be seeing tax rates heading south any time soon.

What about the increase in personal tax allowance in April, is that not effectively a reduction in income tax for most people?

Alpine

PreludeForTimeFeelers wrote: »

Nope, it's you who is wrong.

Using listentotaxman to work out the tax values, a gross wage of £25,000 gives you a net wage of £19,532.04. If we break these down into weekly figures, that's £480.77 gross, or £375.62 net.

CS2: 25% of £375.62 = £93.91 which would be rounded to a weekly liability of £94
CMS2012: 19% of £480.77 which gives you a weekly liability of £91.35, which would be rounded down to £91.

So using your figures, an NRP earning £25k a year, with 3 kids, would be £3 per week better off.

Annual figures would be approx £4883 vs £4750 - a reduction of about 3%, rather than your quoted 8% increase.

Yes, you're right. Somehow I managed to use £22,000 for the Net calculation. Apologies.