Child Benefit tax

calcotti

Sprout0808 said:.

It's based on 50k rather than 60k

I know it starts at 50k. Once you go over £50 you have to start some back. What I said was

calcotti said:. If your income is below £60,000 you keep some of the CB.

Sprout0808 said:.  Plus now I have to have my tax free allowance reduced to pay back this last year's money.

The issue of having to back money from this year is a separate issue. That is going to happen regardless of what you decide for the next year,

Sprout0808 said: it does seem unfair that it's not based on combined household salary

Am sure everybody agrees with that other than those in control of policy in the government.

InMyDreams

calcotti said:

Sprout0808 said: it does seem unfair that it's not based on combined household salary

Am sure everybody agrees with that other than those in control of policy in the government.

Not saying that I don’t agree with you, but isn’t that the same with all income tax / NI?

Eg a couple each earning, say, £25k (or £20k and £30k or £15k and £35k…) will have a substantially lower combined tax burden than a couple where one earns £50k and the other earns nothing. Even more extreme at £50k + £50k compared to a single £100k.

Flugelhorn

InMyDreams said:

calcotti said:

Sprout0808 said: it does seem unfair that it's not based on combined household salary

Am sure everybody agrees with that other than those in control of policy in the government.

Not saying that I don’t agree with you, but isn’t that the same with all income tax / NI?

Eg a couple each earning, say, £25k (or £20k and £30k or £15k and £35k…) will have a substantially lower combined tax burden than a couple where one earns £50k and the other earns nothing. Even more extreme at £50k + £50k compared to a single £100k.

absolutely @in@InMyDreams - it took me some time to twig when we both took our occupational pensions and I stopped working, we seemed to have more spare cash than before, came down to the fact that we had an extra 1275 0% tax allowance that we hadn't had before + much more at 20%

Strummer22

Sprout0808 said:

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

@Sprout0808 you don't seem to have quite understood so I'll lay it out as plainly as possible: 

At 50k income you receive 100% of the child benefit. At 60k income you receive none of it. At 55k you receive half of it. Etc etc.

So if you earn only a little over 50k, you get to keep most of the child benefit. You will still have more net income than if you earned £49,999.

I'm in a similar situation to you, I've got 2 kids and my income is between 50-60k, and my wife doesn't earn much (less than 10k). It's galling that a couple where each earns 50k would get to keep the child benefit but we have to pay some of it back, but it's still worthwhile claiming it. 

Because of the high marginal tax rate with the 40% threshold and decreasing CB payments above 50k income, you can at least make very tax efficient charity and pension payments (assuming relief at source) when you're in this income band. Try playing around with this calculator to see the effect of pension/gift aided charity payments: https://www.gov.uk/child-benefit-tax-calculator

Sprout0808

Strummer22 said:

Sprout0808 said:

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

@Sprout0808 you don't seem to have quite understood so I'll lay it out as plainly as possible: 

At 50k income you receive 100% of the child benefit. At 60k income you receive none of it. At 55k you receive half of it. Etc etc.

So if you earn only a little over 50k, you get to keep most of the child benefit. You will still have more net income than if you earned £49,999.

I'm in a similar situation to you, I've got 2 kids and my income is between 50-60k, and my wife doesn't earn much (less than 10k). It's galling that a couple where each earns 50k would get to keep the child benefit but we have to pay some of it back, but it's still worthwhile claiming it. 

Because of the high marginal tax rate with the 40% threshold and decreasing CB payments above 50k income, you can at least make very tax efficient charity and pension payments (assuming relief at source) when you're in this income band. Try playing around with this calculator to see the effect of pension/gift aided charity payments: https://www.gov.uk/child-benefit-tax-calculator

Thanks. That makes sense. Having worked out bonuses etc I'm at just over £58k a year. I think it's a tough one yo swallow as it was only this year HMRC told me to start doing the self assessment and then to pay back CB from previous year. I had no knowledge before that it was taxed. We have done our budget based on having the full CB so we just need to recalculate our outgoings etc.  Bitter pill to swallow but we obviously have to. 

We're not really in a position to put any more towards charity or pension but again, nothing we can do about the situation. 

Using that website I think it'll work out as us keeping about £310 a year so it does just still make it worth having it. 

Appreciate all the help.

Dazed_and_C0nfused

[Deleted User] said:

Welcome to the club!!!!

It's going to catch millions more out.

The 50k threshold hasn't been increase since it was bought in 2013.

Nice earner for the government. And probably no chance of it ever changing.

Yes, it maybe needs a new name given some basic rate taxpayers will now be having to pay a little bit back!!

calcotti

Dazed_and_C0nfused said:

[Deleted User] said:

Welcome to the club!!!!

It's going to catch millions more out.

The 50k threshold hasn't been increase since it was bought in 2013.

Nice earner for the government. And probably no chance of it ever changing.

Yes, it maybe needs a new name given some basic rate taxpayers will now be having to pay a little bit back!!

Indeed, not increasing the threshold to at least match higher rate income tax threshold is just adding complexity to the tax system.

daveaspy

Sprout0808 said

Thanks. That makes sense. Having worked out bonuses etc I'm at just over £58k a year. I think it's a tough one yo swallow as it was only this year HMRC told me to start doing the self assessment and then to pay back CB from previous year. I had no knowledge before that it was taxed. We have done our budget based on having the full CB so we just need to recalculate our outgoings etc.  Bitter pill to swallow but we obviously have to. 

We're not really in a position to put any more towards charity or pension but again, nothing we can do about the situation. 

You might not be able to put more into a pension, but are you putting something into your pension out of that 58k? Your income for the purposes of child benefit is reduced by certain pension contributions (depending on the scheme used) so you should make sure you work out the right number.

Search out any gift aid payments too as these also reduce your income for this case - might not be much but some memberships have gift aid you could knock off your total

So many people caught by this, and so many don't know about it until they get the letter for prior years repayments. I think I'll be able to scrape under this year with a small pension topup, but next tax year I'm hoping to earn mid 60s so really need to think about what I do with that. I've got a couple of kids and also get stung with student loan repayments so lose about 7k on the first 10k over 50k - its just not worth taking it as salary! Might have to be another bumper year into the pension then have a year off the following year.

ZaSa1418

I feel your pain, i am going over the threshold this year due to a bonus. Our company has a policy where we can add some of our bonus into our pension up to a certain amount but my MD doesn't tell us about the bonus until it is too late. 
Luckily i have kept some of it back to pay it back straight away rather than them changing any tax code