Child Benefit tax 12 February at 5:18PM in Cutting tax 20 replies 616 views

Sprout0808

I now earn over £50k made up of salary, car allowance and annual bonuses. My wife receives child benefit payments as we have 2 children. It works out at around £145 a month. 
I had a letter to say that now I earn over 50k I need to do a self assessment and will be taxed on child benefit payments. Whist this is frustrating I understand but when I got my new tax code it seems , from a discussion with hmrc, that they reduce my personal allowance as I have to pay back most of the benefit payments. 

So I'm trying to work out if it's actually worth having them. Seems very harsh that because I earn a bit over 50k that we will now be at least £125 worse off each month. 

Is this right? Am I best yo take the hit and just stop getting the payments?

Any help appreciated 

Flugelhorn

I think it is up to you really   -I was on Self assessment anyway , DH got the child benefit, we stuck in it an account to offset the mortgage and then paid it back along with the rest of the tax about 18 months later

Dazed_and_C0nfused

It's not actually what you earn that matters.

It's your adjusted net income, which for most people is total taxable income less any Gift Aid payments or some, but not all, pension contributions.

And it's on a sliding scale so someone with adjusted net income of say £53,000 would ultimately still keep 70% of the Child Benefit.

Whist this is frustrating I understand but when I got my new tax code it seems , from a discussion with hmrc, that they reduce my personal allowance as I have to pay back most of the benefit payments. 

Someone has misunderstood something there as the only thing that can reduce your Personal Allowance is having adjusted net income over £100k.

I suspect you mean your tax code allowances have been reduced, either to pay back HICBC from a previous tax year or to provisionally collect extra tax towards any HICBC due for the tax year the tax code relates to.

Sprout0808

Dazed_and_C0nfused said:

It's not actually what you earn that matters.

It's your adjusted net income, which for most people is total taxable income less any Gift Aid payments or some, but not all, pension contributions.

And it's on a sliding scale so someone with adjusted net income of say £53,000 would ultimately still keep 70% of the Child Benefit.

Whist this is frustrating I understand but when I got my new tax code it seems , from a discussion with hmrc, that they reduce my personal allowance as I have to pay back most of the benefit payments. 

Someone has misunderstood something there as the only thing that can reduce your Personal Allowance is having adjusted net income over £100k.

I suspect you mean your tax code allowances have been reduced, either to pay back HICBC from a previous tax year or to provisionally collect extra tax towards any HICBC due for the tax year the tax code relates to.

Yes sorry, that's what i mean by reducing allowances. I have to pay back money from 22-23 and it's reduced for 23-24. I was told that I'd be about £130 worse off if I keep the child benefit so it seems almost pointless to have it 

Sprout0808

Flugelhorn said:

I think it is up to you really   -I was on Self assessment anyway , DH got the child benefit, we stuck in it an account to offset the mortgage and then paid it back along with the rest of the tax about 18 months later

The problem is we budgeted for having it. I wasn't aware of the tax until I got a letter a couple of months ago

Jeremy535897

It was introduced in 2013, and there have been quite a few high profile cases about it.

JGB1955

Sprout0808 said:

Dazed_and_C0nfused said:

It's not actually what you earn that matters.

It's your adjusted net income, which for most people is total taxable income less any Gift Aid payments or some, but not all, pension contributions.

And it's on a sliding scale so someone with adjusted net income of say £53,000 would ultimately still keep 70% of the Child Benefit.

Whist this is frustrating I understand but when I got my new tax code it seems , from a discussion with hmrc, that they reduce my personal allowance as I have to pay back most of the benefit payments. 

Someone has misunderstood something there as the only thing that can reduce your Personal Allowance is having adjusted net income over £100k.

I suspect you mean your tax code allowances have been reduced, either to pay back HICBC from a previous tax year or to provisionally collect extra tax towards any HICBC due for the tax year the tax code relates to.

Yes sorry, that's what i mean by reducing allowances. I have to pay back money from 22-23 and it's reduced for 23-24. I was told that I'd be about £130 worse off if I keep the child benefit so it seems almost pointless to have it 

Is your partner working? If not it might be worthwhile them claiming the benefit (but not the money) as they will receive NI credits, all of which go to their State Pension.  If you're both working, and grandparent(s) provide child care, THEY can receive the NI benefit.

Sprout0808

JGB1955 said:

Sprout0808 said:

Dazed_and_C0nfused said:

It's not actually what you earn that matters.

It's your adjusted net income, which for most people is total taxable income less any Gift Aid payments or some, but not all, pension contributions.

And it's on a sliding scale so someone with adjusted net income of say £53,000 would ultimately still keep 70% of the Child Benefit.

Whist this is frustrating I understand but when I got my new tax code it seems , from a discussion with hmrc, that they reduce my personal allowance as I have to pay back most of the benefit payments. 

Someone has misunderstood something there as the only thing that can reduce your Personal Allowance is having adjusted net income over £100k.

I suspect you mean your tax code allowances have been reduced, either to pay back HICBC from a previous tax year or to provisionally collect extra tax towards any HICBC due for the tax year the tax code relates to.

Yes sorry, that's what i mean by reducing allowances. I have to pay back money from 22-23 and it's reduced for 23-24. I was told that I'd be about £130 worse off if I keep the child benefit so it seems almost pointless to have it 

Is your partner working? If not it might be worthwhile them claiming the benefit (but not the money) as they will receive NI credits, all of which go to their State Pension.  If you're both working, and grandparent(s) provide child care, THEY can receive the NI benefit.

Yes she works part time. I didn't realise about NI benefits. I may have to speak again to HMRC and Child benefit office to get the exact figures and make a decision that way. 
I realise it is what it is, but it seems a big tax for someone just going over a threshold. 

purdyoaten2

Sprout0808 said:

JGB1955 said:

Sprout0808 said:

Dazed_and_C0nfused said:

It's not actually what you earn that matters.

It's your adjusted net income, which for most people is total taxable income less any Gift Aid payments or some, but not all, pension contributions.

And it's on a sliding scale so someone with adjusted net income of say £53,000 would ultimately still keep 70% of the Child Benefit.

Whist this is frustrating I understand but when I got my new tax code it seems , from a discussion with hmrc, that they reduce my personal allowance as I have to pay back most of the benefit payments. 

Someone has misunderstood something there as the only thing that can reduce your Personal Allowance is having adjusted net income over £100k.

I suspect you mean your tax code allowances have been reduced, either to pay back HICBC from a previous tax year or to provisionally collect extra tax towards any HICBC due for the tax year the tax code relates to.

Yes sorry, that's what i mean by reducing allowances. I have to pay back money from 22-23 and it's reduced for 23-24. I was told that I'd be about £130 worse off if I keep the child benefit so it seems almost pointless to have it 

Is your partner working? If not it might be worthwhile them claiming the benefit (but not the money) as they will receive NI credits, all of which go to their State Pension.  If you're both working, and grandparent(s) provide child care, THEY can receive the NI benefit.

Yes she works part time. I didn't realise about NI benefits. I may have to speak again to HMRC and Child benefit office to get the exact figures and make a decision that way. 
I realise it is what it is, but it seems a big tax for someone just going over a threshold. 

It’s always been unfair but it’s seems it’s here to stay. Husband and wife both earning 49000 retain full child benefit. One with NSI just over 50000 and the other earning nothing - full child benefit not receivable. 

calcotti

JGB1955 said:

Is your partner working? If not it might be worthwhile them claiming the benefit (but not the money) as they will receive NI credits, all of which go to their State Pension.  If you're both working, and grandparent(s) provide child care, THEY can receive the NI benefit.

As JGB says your wife, can if she wishes, continue to claim CB but decline the payments. Note however that NI credits are only attached to Child Benefit under the age of 12 so relevance depends on the age of your youngest child.

Sprout0808 said:. I was told that I'd be about £130 worse off if I keep the child benefit so it seems almost pointless to have it 

I can’t see how your household can be worse off. If your income is below £60,000 you keep sum of the CB. If you go over £60,000 you effectively have to pay the CB back. I don’t think you can be worse off.
.

purdyoaten2 said:

It’s always been unfair but it’s seems it’s here to stay. Husband and wife both earning 49000 retain full child benefit. One with NSI just over 50000 and the other earning nothing - full child benefit not receivable. 

That was pointed out as soon as Osborne introduced it but no one has chosen to reverse the change,

Sprout0808

calcotti said:

JGB1955 said:

Is your partner working? If not it might be worthwhile them claiming the benefit (but not the money) as they will receive NI credits, all of which go to their State Pension.  If you're both working, and grandparent(s) provide child care, THEY can receive the NI benefit.

As JGB says your wife, can if she wishes, continue to claim CB but decline the payments. Note however that NI credits are only attached to Child Benefit under the age of 12 so relevance depends on the age of your youngest child.

Sprout0808 said:. I was told that I'd be about £130 worse off if I keep the child benefit so it seems almost pointless to have it 

I can’t see how your household can be worse off. If your income is below £60,000 you keep sum of the CB. If you go over £60,000 you effectively have to pay the CB back. I don’t think you can be worse off.

It's based on 50k rather than 60k but the essence is the same. We have been having the 145. I now earn a little bit more (doesn't work out nearly at £145 better off per month)
So now instead of having it we have to pay it back so we lose the money essentially.  Plus now I have to have my tax free allowance reduced to pay back this last year's money.

I realise I'm stuck with no options but it does seem unfair that it's not based on combined household salary