MegaSack DRAW - This year's winner is user - rgwb
We will be in touch
So, receive a letter from HMRC stating we've two options RE child benefit:
-stop receiving it altogether
-pay tax on the sum received, either "all or some of the the value as tax"
In plain English it states that if you earn about 60k you will pay the sum received as benefit, as tax. To me this sounded like "here's £50 benefit, that'll be £50 tax please...."
But... When playing about with the HMRC website, and putting in info as if I earns above £60k (I don't), it states that we would receive circa £1k in benefit, and pay £263 as tax via self assessment, which is 100% of the benefit received (sic).
Eh?! That's not even 40% tax on the value of the £1k received, so what am I missing.
If you earned over 60k, why would you stop receiving? You'd still receive almost £750 instead of £1080 ish, so what's the catch. Self assessment really that off putting?
What am I missing?
DrP
BTW - the astute will have noticed that [b]nowhere[/b] do I pose the question, why would someone earning over £500 a year think they need to receive any benefits at all....!!
BTW - the astute will have noticed that nowhere do I pose the question, why would someone earning over [b]£500 a year [/b]think they need to receive any benefits at all....!!
So you grudge someone earning over £500 a yr? That is a shit hourly rate.
"doffs hat to the man"
Nope, more that I accept there's ethical points about high earners taking benefits,but in this case I'm not interested in that, I'm unclear if I'm missing an obvious taxy type thing.....?
DrP
I'm unclear why you think earning £500 a year classes you as a high earner and not have access to benefits. I suspect it might be a typo on your part tho. 😉
It was meant to be a tongue in cheek low value - the ideal often spouted around these parts is that anyone with 2p to rub together is minted and should be grateful..... 😉
Anyway, back to point.....
DrP
In 'your' position I'd take the CHB and then pay tax on it, what happens if you don't earn enough? Redundancy etc, or if people earn just over they could put the lot into their pension at the end of the tax year, thereby reducing their income below the threshold.
It's odd:
Between 50-60k you pay a percentage of the child benefit as tax - 55k = 50%, 52.5k = 25% etc.
But... the way the HMRC sell it, it sounds like you pay [b]half [/b]the CB received [back as tax] if you earn £55k, but when you enter figures into the website, the maximum you would ever pay back, i.e. 100% payback, would be £263....
So...where's the catch? Why, financially, would someone STOP receiving the benefit?
DrP
So...where's the catch? Why, financially, would someone STOP receiving the benefit?
Dr P, over 60k you are deemed to earn too much to need to be given Child Benefit. You can claim it but if you earn over £60k you have to return all of it via tax after completing self assessment - or to save yourself the hassle, don't claim it.
Between £50k - £60k you pay a percentage per £1k earned over £50k back throughtax £51k = 10% of the annual CHild Benefit paid back, £52k = 20% etc to £60k.
Just the goverments way of saving money yet actually respending it by introducing an admin heavy scheme IMO.
I agree that it's confusing - the calculator doesn't ask how much you earn, so can;t apply their own rules!
And it continues not to take into account family income (eg 2 people on 21k and 40k respectively means they continue to get CB. One person on 61k means they get none). This isn't middle class whinging, rather a reflection on a non-joined up tax system.
FWIW most universal benefits can be seen as tax breaks, rather as happens in the USA. What this means is that, if you're over the threshold, you've effectively lost your tax break....
I read the wording in the letter as being if either parent earns over £60k and it is claimed it is all recouped via the SA..
/rant deleted/
OP just put more money into your pension and bring your salary under the threshold?
Edit: that wasn't what you were asking. I think we can all agree that it is a ridiculous system
Dr P, over 60k you are deemed to earn too much to need to be given Child Benefit. You can claim it but if you earn over £60k you have to [b]return all of it via tax after completing self assessment[/b] - or to save yourself the hassle, don't claim it.
What I thought...
But if I earn £61k, I receive £1k in benefit, and pay only £263 in tax via SA..
These are figures from their website!
OP just put more money into your pension and bring your salary under the threshold?
I'm nearer the top of the scale TBH - too much to invest, though a good idea.
DrP
It can't be clearer than this?
[i]"Charge on income of £60,000 or more
If your individual income is £60,000 or more, the tax charge will be equal to the full amount of Child Benefit you, or your partner, are entitled to receive.
Example
Your individual adjusted net income is £62,000. You, or your partner, were entitled to receive Child Benefit of £438 for two children for the period from 7 January 2013 to 5 April 2013.
Your tax charge will be £438."[/i]
By the way your pension doesn't help you - HMRC use your NI code to test the tax return on Child Benefit - the same NI code is of course used to inform them of tax releif on your pension and therefore by proxy how much pension contrinution you are making.
And the 50-60k example:
[i]Example
Your individual adjusted net income is £54,000. You are entitled to Child Benefit for two children of £438 for the period from 7 January 2013 to 5 April 2013.
Your tax charge will be worked out as follows:
Step one: income over £50,000 = £4,000
Step two: determine the percentage rate to be applied to the result from step one, so £4,000 ÷ 100 = 40 (%)
Step three: £438 x 40% = £175
'Your tax charge will be = £175[/i]
Link [url= http://www.hmrc.gov.uk/childbenefitcharge/howworks.htm ]here[/url]
Kryton, that is very clear and what I originally thought would be the case - where's that from (just found it on the HMRC site..)???
I went via the HMRC website too, entered my details on the calculator thing, and it came out with a MAX charge (i.e. 100% charge) of £263....
Will try again..
Child Benefit Your results
Child Benefit you get for the tax year £1055.60
Child Benefit that’s counted when working out the tax to pay £263.90
Percentage of Child Benefit you must pay as tax 100.0%
I get it - it's all to do with the changes starting Jan, but tax running till April!
Hence my original guess is right - may as well stop it....
This is making me depressed...ooh - incapacity benefit here I come 😉
DrP
Anyone know if a car allowance is counted towards your annual salary for Child Benefit reduction purposes?
russionbob - yes if its paid through your salary / HMRC are exposed to it.
ANY income is counted towards gross income for HMRC's calcs.
I know it’s not quite what you’re talking about but, don’t forget if one of you is a SAHP and the other is over the threshold, the SAHP should still claim the CB so make sure they get their NI contributions kept up.