Child Benefit Tax

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  • Child Benefit Tax
  • gonefishin
    Member

    Indeed Jambo, married persons tax allowance is a joke.

    Why on earth should people get a tax break just for being married? Subsidising people who choose to not work is daft.

    Premier Icon jam bo
    Subscriber

    as daft as removing a family benefit based on a single income rather than the household income?

    gonefishin
    Member

    This has been discussed many times and there hasn’t been an argument that has moved my opinion from…

    “Yeah it isn’t fair but it is simple to administer. Also no one said life would be fair and as it really only affects relatively high earners (of which I am one) I really can’t get too worked up about it. There are far bigger injustices in the benefit system to be addressed first”

    …to anything else.

    Premier Icon jam bo
    Subscriber

    for interest, I looked it up.

    two parents living in the same house earning £30,000 each, will pay ~£4500 less in tax per year than a single earner earning £60,000. who would then lose any child benefit on top of that.

    now I now the response will be ‘rich, wealthy, blah, blah, blah’ but whereever the level is set, it penalises the situation that many have chosen that one is the primary earner and the other the primary carer.

    Premier Icon thisisnotaspoon
    Subscriber

    now I now the response will be ‘rich, wealthy, blah, blah, blah’ but whereever the level is set, it penalises the situation that many have chosen that one is the primary earner and the other the primary carer.

    Arguably two part timers would be better economically? Otherwise after 5/10/15/18 years you end up with 50% of the population who should be at the peak of their career going back into workforce well below their potential. The UK has low productivity so that would seem like a decent nudge in the right direction.

    But yea……. moaning about how the benefits system penalizes those earning £50k+. My heart bleeds at the thoight of such injustices.

    nickewen
    Member

    I’m a bit confused (and now worried) having read this thread.. We had a baby 7 months ago but due to my income we know that we aren’t due any child benefit as above the threshold. However, are people saying my wife may have inadvertently been receiving some benefit automatically? I have not completed any claim forms, SA, etc. and I am PAYE.

    Premier Icon igm
    Subscriber

    I use one of those old fashioned paper forms for my (mainly CB driven) tax return.
    And a fountain pen.

    Strangely satisfying.

    neilnevill
    Member

    Gonefishin, if you think looking after kids full time isn’t working then they view would make some sense.

    gonefishin
    Member

    Gonefishin, if you think looking after kids full time isn’t working then they view would make some sense.

    I have to say that I’m not sure what you mean by that. I’ve never made any such comment and I seriously doubt that the level of child benefit would cover the minimum wage if child care was supposed to pay for a parent to look after their child.

    Premier Icon tthew
    Subscriber

    @nickewen, as was pointed out on page 1 there is some confusion between child benefit and child tax credit.

    Child benefit is about 80 quid per week, and if you are getting paid that it will likely be a direct payment to an account nominated by your wife. If you are earning over £50k a proportion of that will be reclaimed through tax, upto 100% at 60k.

    Tax credit is something that low income households get, unless they think you or your wife is a single parent in receipt of other benefits, it’s unlikely you are getting that.

    neilnevill
    Member

    You said ‘choose not to work’, I am suggesting child care is work, hard, important, unpaid but it’s work.

    Premier Icon sockpuppet
    Subscriber

    You said ‘choose not to work’, I am suggesting child care is work, hard, important, unpaid but it’s work.

    There is no doubt that caring for a small child is difficult, tiring, and loses you lots of sleep. In the vernacular, it’s “hard work”.

    But this is a discussion about taxation and paid employment, ie “work”.

    Please don’t force a false equivalence between “hard work” and “work”. It’s not helpful.

    Most folk in the uk are pretty well off given a global comparison. Anyone troubling the child benefit threshold (whether one or both parents work) certainly is. Hence both parents working in paid employment being “a choice”.

    I’m not judging. We have kids, we both work since we need a certain income to support our other choices. But we could have chosen not to.

    And yes, that marginal rate between 50-60k does feel harsh, but doing it better would be hard to do.

    As for two folk on 30k being better off… yes, but…

    Jobs where you can earn 30k on 2.5 days a week are rare. You’d need two, perfectly deconflicted, or childcare costs emerge that wipe out the gains.

    wrightyson
    Member

    Edited 4 times because I just think it’s unfair!

    stanfree
    Member

    Just been caught out with this as well , looking like about £3200 . As no real savings im wondering the best way to try and pay it back . Looks like it ill be a loan through works credit union or see If they can take the payment back through my tax. Really crap system and you still have to go ahead and stop the payments or they just keep on paying you.

    wrightyson
    Member

    As I said right at the top I was advised to keep the payments coming and put it aside. It adds (I don’t know how but that’s what we pay an accountant for) to NI payments somehow whether it’s me or mrsws and is apparently a real ball ache to get reinstated once you cancel it.

    nickewen
    Member

    Thank you tthew. Panic owa

    @tthew Mostly true, but Child benefit is about £83 every four weeks so there is 13 payments a year totalling about £1100 per annum.

    In other news; The other ‘unfair’ bit about the way the legislation is enforced/worded is that you cannot backdate a claim. If you are earning more than £60k at the start of the tax year and cancel the payment, but later get made redundant and end up earning less than £60K, you cant claim it back. However, HMRC can revisit any payments for 10 years.

    My accountant gets me to claim child benefit and pay it back via my tax code, but HMRC get this bit wrong every year (we are borderline eligible and I have been expecting to be made redundant for some time).

    As above, our friends earn more than us as a household, but claim it every year.

    Its a rubbish system for many reasons.

    gonefishin
    Member

    You said ‘choose not to work’,

    Ah right I understand where you are coming from. That statement was meant to reference transferring tax allowances between married couples; there was no who have kids reference. That is why I mentioned “choosing not to work” as without kids then that is what it means. It was in no way an attempt to say that looking after kids isn’t work although I can see how it would come across that way. I should have been clearer.

    flashpaul
    Member

    Anyone know if a company car benefit needs to be added to basic salary?

    As far as I can work out company car benefit is already taken out in tax and doesn’t need to be added to salary but confirmation would be great

    Premier Icon tthew
    Subscriber

    @bentandbroken, thanks for that clarification, my mistake was somewhat fundamental! 🤭

    Premier Icon AD
    Subscriber

    flashpaul – bik value of car needs to added to your salary to get the top line figure. This may well take you over the threshold. Any other ‘perks’ such as healthcare also need to be added.
    You can deduct pension contributions though – one of the reasons why usual advice is to increase pension contributions if you can.

    Premier Icon sockpuppet
    Subscriber

    Re: still claiming if you’re over 60k…

    If one parent isn’t working in order to look after kids & they claim Child Benefit they get credited with a qualifying year towards state pension. If you claim it then pay it back there’s that residual bonus. One good improvement has been you can now claim the ‘zero rate’ of CB (one of the options when you claim it) so the other parent still gets the pension but it doesn’t affect your tax.

    But otherwise the argument above is the other reason to claim the full amount. yes, claim it in case you get to keep some! You never know, you can’t claim it in retrospect, but can always give it back if things go well and you turn out to earn more than 60k.

    chambord
    Member

    I was confused about this when I did this last year so maybe someone can advise.

    Is this on taxable income or gross salary? (I put my gross salary)

    Also should you deduct pension contributions if your pension is salary sacrifice? (I didn’t deduct this either because I wasn’t 100% sure and it seemed to suggest I shouldn’t)

    DT78
    Member

    I used the number on my p60 earnings in employment. This number was my gross minus c2w and child care vouchers. It was not minus my pension. I have no idea why. This would suggest additional pension contributions wouldn’t make a difference like everyone says

    neilnevill
    Member

    the £50k threshold is taxable income so remove any pension contributions where ever they are made (private pension scheme, or employee contributions to a work scheme, or AVCs or…what ever so long as its in a pension wrapper) from your gross earnings.

    https://www.pruadviser.co.uk/knowledge-literature/knowledge-library/reduce-high-income-child-benefit-charge/#

    first example should help explain it.

    I think I’m on a sticky wicket with this one also. Genuinely didn’t know until a conversation with a colleague a week back who does SA and reckons he gets a rebate.
    I do religiously take the max cycle to work vouchers so that should take my exposure down. I think our company pension is smart. Whatever that is so that might reduce it further. If it doesn’t then the Tesla I was thinking of on the employee car scheme is literally going to pay for itself next April. What with EV BIK being zero.
    It’s an absurd game of monopoly isn’t it.

    Premier Icon russyh
    Subscriber

    But yea……. moaning about how the benefits system penalizes those earning £50k+. My heart bleeds at the thoight of such injustices.

    I think that is a little unfair and narrow minded, for many reasons already cited.  Whats unfair is expecting people who have always been PAYE to know of a change in the rules, then expect them to SA themselves.  Especially when the IR have all the details already.  Then when they finally decide to inform you 3/4 years down the line to expect an immediate payment, plus fine, plus interest…well that’s not fair.  I’m fortunate enough to earn over the rate where I have to pay back the full amount, doesn’t mean I’m lying on mattresses stuffed full of £20 notes, or wipe my arse with tenners.  In fact because of how they set the rules based on a single persons income rather than a families, we could be worse off.  For me the fact that I (my wife) had claimed CB inadvertently incorrectly is not in dispute, just why it takes 3/4 years to be notified and why; given in my opinion the System is also partly to blame, you are fined and expected to magic up around £5k (in my case) But yet we read all the time of people genuinely and consciously ripping off the benefits system in the U.K.

    gonefishin
    Member

    Especially when the IR have all the details already. Then when they finally decide to inform you 3/4 years down the line to expect an immediate payment, plus fine, plus interest…well that’s not fair

    No different to any other honest error made on a self assessment, I’ve been caught by this in the past. As for the “we didnt know” it’s been all over the press for years. Even I knew about it and I don’t have kids. Also everyone who is a higher rate tax payer really should be doing a self assessment.

    Premier Icon russyh
    Subscriber

    No different to any other honest error made on a self assessment, I’ve been caught by this in the past. As for the “we didnt know” it’s been all over the press for years. Even I knew about it and I don’t have kids. Also everyone who is a higher rate tax payer really should be doing a self assessment.
    <span style=”font-size: 0.8rem;”>
    </span>

    <span style=”font-size: 0.8rem;”>well it is, because I wasn’t making a self assessment at the time, I do now!  As for the ‘all over the press’ I didn’t know (call me a liar if you like, but given the number of people getting caught it suggests I’m not unique) I had heard about proposals in a budget years previously but no leaflets, letters or “press” that I saw? We receive  a letter each year asking if there had been a change in circumstances we even notified them of pay rises….nothing.  </span>

    Also, why should every Higher rate earner self asses?  Genuine question.  I have for the last few years now, since this issue.

    it’s been all over the press for years

    I’ve never seen it. Mind I don’t listen to much mainstream tv or radio and don’t buy newspapers.
    I would argue HMRC has failed to reach my demographic. It wouldn’t take much imagination to publicise this rule via adverts on YouTube /Podcasts/Forums/Spotify. Even motorway signs.
    Why on earth couldn’t they just write to all the higher rate payers. No excuse then.

    Premier Icon garage-dweller
    Subscriber

    Wasn’t this why they encouraged / gave people the opportunity to completely opt out when it first came out. I know we did because the tax hassle for level of return was monumentally skewed.

    It wasn’t very clear at the time and we nearly missed the cut off.

    I’d concur that it was badly publicised at the time and not enough clear information given the implications.

    gonefishin
    Member

    Also, why should every Higher rate earner self asses? Genuine question.

    As a higher rate tax payer you can be liable for additional tax on things like savings, capital gains tax, dividend payments. You can also be eligible for additional tax reliefs on things like pension contributions and charitable donations. A self assessment is the only method of sorting all that stuff out.

    The fundamental issue is that as individuals we are responsible for our own tax returns and for any errors that may be there and yes I’ve been caught out in the past albeit on another issue. I didn’t get fined, although it was a distinct possibility, and I only had to pay the overdue tax. Ignorance is not and never has been a defence.

    Edit. A bbc news report from 2010.

    https://www.bbc.co.uk/news/uk-politics-11464300

    2nd Edit.

    Why on earth couldn’t they just write to all the higher rate payers. No excuse then.

    Be honest now, if they had done that would you actually have taken the time to sit down and read a letter like that, never mind remembering to act on it to do a SA 18 months later?

    Premier Icon garage-dweller
    Subscriber

    Be honest now, if they had done that would you actually have taken the time to sit down and read a letter like that, never mind remembering to act on it to do a SA 18 months later?

    I think the thing with this is they probably have the data to run a letter once a year. Noone is born knowing this stuff and tax law and practice is constantly shifting. It’s pretty hard for the man on the Clapham omnibus to be 100% on top of everything in our tax environment. If as a society we want to collect the taxes from individuals who fall into that less complex/less knowledgeable category then morally and practically they ought to be helped.

    bensales
    Member

    One good improvement has been you can now claim the ‘zero rate’ of CB (one of the options when you claim it) so the other parent still gets the pension but it doesn’t affect your tax.

    This shouldn’t get buried in the noise as it’s very important.

    You don’t need to claim it and bank it to pay it back if you’re over the threshold. The “zero rate” option has been there since the very beginning. We’ve used it since the rule came in as I’ve always been over the threshold and my wife stopped work when we had our first child in 2009.

    Checking her NI contributions on the HMRC website shows she has full contributions and thus full state pension eligibility still.

    And as for higher rate tax payers always needing to do a self assessment, that’s not true either. I have very simple affairs, and have never needed to do an SA, yet have been in the higher rate for a long time.

    gonefishin
    Member

    I take you’re point but where do you stop? How realistic is it to expect a letter every year detailing all the changes to tax law that have happened that may impact an individual? If letters get that complex and detailed the chances of anyone actually reading them, never mind understanding them, will likely go down.

    This is the same argument used by campaigners against the changes to women’s state pension age. I don’t think it is a realistic proposal for that issue and I don’t think it will work on this issue either. The press is the best way to get the idea out.

    Premier Icon v8ninety
    Subscriber

    If it is simple and important enough to put a national tv advert out, SURELY it is important and simple enough to send a letter out to anyone who looks to be close to the threshold of being affected by it. ESPECIALLY if HMRC think it’s fair game to fine people for not watching tv. It’s a lot more justifiable to fine someone for not paying attention to a letter from the tax man than it is for not paying attention to the filler during the tea making breaks on love island or strictly…

    it’s been all over the press for years

    Didn’t see it, so presumably not in the media that I consume. Couple of newspaper adverts and something in the ad break on Saturday Night Takeaway doesn’t really cut it.

    How realistic is it to expect a letter every year detailing all the changes to tax law that have happened that may impact an individual?

    It’s a policy change that requires immediate action on the part of thousands of PAYE taxpayers, can lead to large sums needing to be repaid alongside fines and interest running into hundreds on top. Anyone on self-assessment would have come across the relevant section in their return paperwork, and you’d expect them to be a bit more savvy in terms of changes in allowances.

    When the rules on Child Tax Credit changed, we received letters warning us – so we checked, then informed them, and cancelled the claim.

    That is the minimum requirement IMO – press ads and tv ads are wholly inadequate, which is probably why HMRC voluntarily refunded our ‘fine’ thanks to hundreds of valid challenges from other folk.

    gonefishin
    Member

    Oh FFS it wasn’t done in adverts it was covered in the press as an actual new story at the time it was announced! It didn’t require “immediate change” as it was announced in 2010 and implemented in 2013. It wasn’t hidden away it was front and centre done at the same time as a lot of the “austerity” measures were implemented.

    To be clear I’m not saying you didn’t miss it but you aren’t being reasonable in expecting to be spoon fed every bit of information that “might” impact you. We all of us need to accept personal responsibility. As far as fines are concerned my personal experience is that HMRC are fairly lenient when an honest mistake is made.

    Premier Icon jam bo
    Subscriber

    i am assuming that the people on here talking about tax credits aren’t the same as those talking about the taxing of child benefit? I can’t see there is much overlap, if you are claiming one, then you aren’t anywhere near the threshold for the other?

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