Tax/child benefits

DotMatrix

Me and the wife are currently celebrating the birth of our first child.

I earn £62.5k a year on an annualised basis but only have a contract position for 6 months. My wife earns £42k a year and is currently on maternity leave so will not see the full salary. Any idea if we are eligible for tax or child benefits.

Thanks in advance.

marliepanda

DotMatrix wrote: »

Me and the wife are currently celebrating the birth of our first child.

I earn £62.5k a year on an annualised basis but only have a contract position for 6 months. My wife earns £42k a year and is currently on maternity leave so will not see the full salary. Any idea if we are eligible for tax or child benefits.

Thanks in advance.

I am almost 100% sure that will be a no.

Spidernick

blondebubbles wrote: »

Limit for tax credits with one child is £26,000. Higher if childcare, up to £41,000 or if disabilities. That is the total household income.

Child benefit is not paid if one parent earns over £60,000.

While I agree with the tax credit statement, the second statement is not entirely correct. It is not earnings as such, but the taxable salary that will appear on the P60, together with any other taxable income in the year.

It is also not correct to say that it won't be paid. Child Benefit can be claimed whatever the income position, it's just that 100% of it would be clawed back via a Self Assessment tax return if taxable income for the year is £60K or more.

If the OP's total earnings and other income for 14/15 are under £60K (and if he doesn't work the full year or gets another contract for a lower salary, this is entirely possible) then he may as well claim the Child Benefit, as it wouldn't all then be clawed back.

If the OP pays into a company or personal pension then this would reduce his taxable earnings for the year (as would gift aid payments), possibly giving taxable income for the year of under £60K and possibly even under £50K to avoid any claw back.

If the OP's taxable income is likely to be close to £60K then he might not think it worth claiming the Child Benefit and then paying most of it back (and having to complete a tax return if he doesn't already), but that is a decision for him.

xylophone

http://www.theguardian.com/money/2013/sep/28/child-benefit-pension-contributions-higher-earners

Spidernick

Spot on - I have three children and every £100 I put into my pension saves me 40% tax, 2% NI and around £24.75 in Child Benefit that is then not clawed back, so an effective savings rate of about 66.75%.

I am putting as much into my pension as possible while I can get this amazing rate and I would recommend that everyone else in the same position does the same (as long as that gives them enough net salary for what they need to live on, etc.).

The potential benefit for the OP won't be as great as mine, with one child, but will still be a lot, if he would otherwise trip over the £50K income threshold.

zagfles

blondebubbles wrote: »

Yes I am aware of all that. The income declared for tax credits and child benefit are the same.

Not quite, for instance things like £100pw of maternity pay and certain taxable benefits like medical insurance don't count as income for tax credits, whereas they are included in the adjusted net income used for child ben. Similarly some income counts for tax credits but not tax/child ben (eg strike pay).

(And yes I know you'll be aware of this - I'm posting for the benefit of other people reading.)