Child Benefit Tax Charge
Discussion
Cats_pyjamas said:
Horses for courses. My wife and I are financially independent, we have a joint account for emergency funds and holidays. These days she earns about 25% less than me. But I cover around 70% of the household bills, as obv I have more disposable income.
Children's are on the horizon, at which point I'll cover all bills, and she can spend from the joint account as required, I'll just maintain an agreed amount in there.
With reference to child benefit it seems I'll be in the 'flux zone', between 50k and 60k, sometimes more sometimes less depending on workflow (overtime/shift/working away). How do people manage this best, put the CB in an account and pay back what's required at the end of the year? It seems crazy you can't retrospectively get this benefit based on the previous years earnings.
Also I have some stocks and shares, outside of a wrapper, if they start paying dividends I assume I'll have to self assess and these might accrue to tipping me over the thresholds also.
I think the general view, and this was the point of my question, is to claim CB and then sort it out afterwards by self-assessment. That would seem to be a no-brainer if you might not have to pay back the full amount, and if, as in your case, you may have to declare dividends anyway.Children's are on the horizon, at which point I'll cover all bills, and she can spend from the joint account as required, I'll just maintain an agreed amount in there.
With reference to child benefit it seems I'll be in the 'flux zone', between 50k and 60k, sometimes more sometimes less depending on workflow (overtime/shift/working away). How do people manage this best, put the CB in an account and pay back what's required at the end of the year? It seems crazy you can't retrospectively get this benefit based on the previous years earnings.
Also I have some stocks and shares, outside of a wrapper, if they start paying dividends I assume I'll have to self assess and these might accrue to tipping me over the thresholds also.
You wouldn't pay it back at the end of the year, you get pretty well 10 months to file and pay your self-assessment. And anything owed can usually be added to your tax code although that can get very messy.
My daughter and her husbands view seems to be that they can't be bothered with all that (I think it's basically that she doesn't trust him to do it) so the easiest thing to do is avoid it altogether by not claiming.
As Eric has pointed out earlier in the thread, self-assessment is supposed to be being done away with, so Goodness knows how it's going to work then.
The Child Benefit Tax Charge requires that each partner is aware of the other partners' income. For some couples, this is a very sensitive area and there could even be danger involved in divulging such information to each other.
There was a recent court case where a couple were let off the fines which are usually levied on failure to disclose and repay the tax charge precisely because they insisted that they did NOT want each other to know how much they were earning. I think HMRC might find themselves losing a few more cases if couples chose to use this defence.
Even married couples are individuals in law with their own personal human rights. This tax charge legislation forces people to divulge their income levels to another individual, which is actually a breach of their human right to keep their income levels secret.
There was a recent court case where a couple were let off the fines which are usually levied on failure to disclose and repay the tax charge precisely because they insisted that they did NOT want each other to know how much they were earning. I think HMRC might find themselves losing a few more cases if couples chose to use this defence.
Even married couples are individuals in law with their own personal human rights. This tax charge legislation forces people to divulge their income levels to another individual, which is actually a breach of their human right to keep their income levels secret.
Senex said:
.
In an ideal world a couple with children should not get married and should both earn £49,999 per annum.
Why shouldn't they be married? CB doesn't care if you're married? In an ideal world a couple with children should not get married and should both earn £49,999 per annum.
Rather than £49,999 per annum they should just look at combined earnings.
You could still earn £65,000 and not have to pay any back, it's your net adjusted salary not your gross salary.
DaveH23 said:
Why shouldn't they be married? CB doesn't care if you're married?
Yes, good point. Nothing to do with CB but rather I was thinking that generally marriage is a risky business for the higher earner of any couple.UK divorce rate is 42% of all marriages.
Say one partner earns 50k and one earns 20k, then the 50k earner gets shafted during the financial settlement of the divorce.
DaveH23 said:
You could still earn £65,000 and not have to pay any back, it's your net adjusted salary not your gross salary.
Apologies if I'm a bit thick but I don't understand this sentence.I thought any individuals gross earnings over 50k attracted CB clawback.
I'm not sure what net adjusted salary is.
Defcon5 said:
Cats_pyjamas, I’m in a similar situation to you, in that overtime would take me into the 50-60k zone.
I ensure my taxable income stays under 50k by doing overtime for time-in-lieu instead of money, and making additional company pension contributions for anything I can’t do that for
And I am in a similar situation to you Defcon.I ensure my taxable income stays under 50k by doing overtime for time-in-lieu instead of money, and making additional company pension contributions for anything I can’t do that for
It looks like I am going to hit 60k this year, but unlike you I am taking the cash, even with losing CB for one child and paying 40% income tax on anything over 50k, I still pocket £400 per month (I don't pay national insurance).
okgo said:
Means after all the various schemes and levers one has to reduce their salary in the eyes of ‘the man’. Pension, electric car scheme, cycle to work etc.
OK, so say in a year I earn 52k and pay 2k into my employer's pension scheme, does that mean if I do a tax return I can claim I only earned 50k? I did a tax return this year and I think I just entered my gross pay and I don't think I mentioned my employer's pension scheme payments.
Eric Mc said:
The Child Benefit Tax Charge requires that each partner is aware of the other partners' income. For some couples, this is a very sensitive area and there could even be danger involved in divulging such information to each other.
There was a recent court case where a couple were let off the fines which are usually levied on failure to disclose and repay the tax charge precisely because they insisted that they did NOT want each other to know how much they were earning. I think HMRC might find themselves losing a few more cases if couples chose to use this defence.
Even married couples are individuals in law with their own personal human rights. This tax charge legislation forces people to divulge their income levels to another individual, which is actually a breach of their human right to keep their income levels secret.
I think you know this, but for others, you can ask HMRC if this (your partner earning too much) is likely to be an issue and they will give a yes/no answer.There was a recent court case where a couple were let off the fines which are usually levied on failure to disclose and repay the tax charge precisely because they insisted that they did NOT want each other to know how much they were earning. I think HMRC might find themselves losing a few more cases if couples chose to use this defence.
Even married couples are individuals in law with their own personal human rights. This tax charge legislation forces people to divulge their income levels to another individual, which is actually a breach of their human right to keep their income levels secret.
It is all pretty bizzare though that there is this is cross over where the affairs of one person affect the tax on the other.
Senex said:
OK, so say in a year I earn 52k and pay 2k into my employer's pension scheme, does that mean if I do a tax return I can claim I only earned 50k?
I did a tax return this year and I think I just entered my gross pay and I don't think I mentioned my employer's pension scheme payments.
The Self Assessment asks for your taxable earnings from your P60. If you do salary sacrifice for your pension then that amount has already been removed from this figure.I did a tax return this year and I think I just entered my gross pay and I don't think I mentioned my employer's pension scheme payments.
If you put the money in your pension yourself then you enter that on a different area of the self assessment.
philv said:
It's a British person's birth right to benefits.
We had our child late in life - she was born in 2011 so we only experienced CB for a short period of time. We fall into the pattern of 1 low earner, 1 high earner. Joint incomes well below the sum of two individual allowances.As a couple we can/could afford not to receive the CB - but it does feel like we've been paying into the system where others benefited for many years only to be excluded from receiving the funds when it was our turn. While it's paid as a benefit - perhaps it should have been granted as an increase to tax free allowance - but I understand why it's not.
So, I think it's unfair to contribute for many years into a system only to see the financial benefit removed. This is something that could easily happen with state pension.
Hondashark said:
The Self Assessment asks for your taxable earnings from your P60. If you do salary sacrifice for your pension then that amount has already been removed from this figure.
If you put the money in your pension yourself then you enter that on a different area of the self assessment.
Thank you,If you put the money in your pension yourself then you enter that on a different area of the self assessment.
Sheepshanks said:
It is all pretty bizzare though that there is this is cross over where the affairs of one person affect the tax on the other.
Amazing how they can manage it for this, but transferring personal allowances, or calculating household tax collectively, nooooooo, we can’t do that….I’m aware there’s some ability to transfer a percentage of personal allowance for very low income earners, but it would be a genuine game changer for families with either very different incomes or one wage earner. Which is why it won’t happen, especially in Scotland.
Sheepshanks said:
I think you know this, but for others, you can ask HMRC if this (your partner earning too much) is likely to be an issue and they will give a yes/no answer.
It is all pretty bizzare though that there is this is cross over where the affairs of one person affect the tax on the other.
Yes - and it flies in the face of the "Independent Taxation" principles that were passed by Parliament back in 1988. Before then, a wife's unearned income (i.e. interest, dividends, rental profits etc), was deemed to belong to her husband's) and he was taxed on that part of her income as if it was all his.It is all pretty bizzare though that there is this is cross over where the affairs of one person affect the tax on the other.
The Child Benefit Tax Charge upsets this fundamental principle, in my view.
Senex said:
DaveH23 said:
You could still earn £65,000 and not have to pay any back, it's your net adjusted salary not your gross salary.
Apologies if I'm a bit thick but I don't understand this sentence.I thought any individuals gross earnings over 50k attracted CB clawback.
I'm not sure what net adjusted salary is.
Senex said:
Defcon5 said:
Cats_pyjamas, I’m in a similar situation to you, in that overtime would take me into the 50-60k zone.
I ensure my taxable income stays under 50k by doing overtime for time-in-lieu instead of money, and making additional company pension contributions for anything I can’t do that for
And I am in a similar situation to you Defcon.I ensure my taxable income stays under 50k by doing overtime for time-in-lieu instead of money, and making additional company pension contributions for anything I can’t do that for
It looks like I am going to hit 60k this year, but unlike you I am taking the cash, even with losing CB for one child and paying 40% income tax on anything over 50k, I still pocket £400 per month (I don't pay national insurance).
I worked out that on that 10k, that I could potentially earn, after 40% tax (4k) 2% NI (0.2k) 7% pension (0.9k) and loss of CB (2k) I’d be left with 3k so working for 7.50 an hour in my pocket
Putting it in the pension gives me 25 an hour, and doing it for Time Off the same (vs the cost to buy more annual leave)
Well all I've got to say is that after being a lifelong 20% taxpayer and always looked upon being a higher rate tax payer as achieving Nirvana, I have finally reached the hallowed ground of being a higher rate tax payer myself, and it SUCKS.
I am now disincentivized to do overtime, which I always used to enjoy as a little bonus, I pay 40% tax on anything over 50k, and also I have to try and tell the Mrs to hand over her free bingo money (i.e. Child Benefit) which didn't work out too well, so now I have to pay tax on that as well.
FML
I am now disincentivized to do overtime, which I always used to enjoy as a little bonus, I pay 40% tax on anything over 50k, and also I have to try and tell the Mrs to hand over her free bingo money (i.e. Child Benefit) which didn't work out too well, so now I have to pay tax on that as well.
FML
okgo said:
Yeh…putting money in your pension and getting a 40% uplift is terrible mate…
Why would you take it as pay if you’re marginally over?
Because I have only about one or two years of work left (my choice), I can leave anytime as I am past retirement age and my pension is pretty much sorted.Why would you take it as pay if you’re marginally over?
The strange thing is the late sixties are the best years to earn, I get paid a salary and also claim state pension and I don't pay National Insurance.
My wife gets Child Benefit because we are raising our granddaughter .
I might moan but I am very fortunate.
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