Child Benefit Tax Charge

[Pit Pony]

jrb43 said:

Beethree said:

MattS5 said:

It's a ridiculous system, when 2 people living together can each earn £49,995 per year and still get paid the allowance. (£99,990 family income)

Yet if 1 person earns £50k, that benefit reduces accordingly, up to £60k ,then it dissapears totally. Regardless of what the partner earns.

Yup, absolutely. Basically punishes you for having a partner who wants to stay at home with the kids.

...while you work in a job that's PAYE. "Solution" is for us all to work in our own limited companies through which we pay our partners disproportionately to open the mail and give them shares alongside looking after the little one....

(Don't follow that, I'm not an expert).

You know those companies with a social consciousness, which allow staff so many days a year to do charity work or help in the community.

Well......

[ChocolateFrog]

If you're only going over by a small amount just put it into your pension.

[Pebbles167]

Most people i know are/were not aware that child benefit is related to income, probably since we're all mid to low earners.

A new role at work put a colleague over £60k, and HMRC eventually came after him for 3 years worth of payments for several kids, he and his wife had no idea and definitely hurt his wallet.

At least I had some warning, so when I also got this role, I told my girlfriend she had to stop claiming the payment, much to her annoyance. I could have put some into my pension, but at 30 years old, retirement seemed years away, and after having another two children, I'd be giving up a lot of my wage that I need right now.

It's stupid that they do it based on a single household income.

At least we can still claim some tax back for childcare, works out the government top up £25 for every £100 we put in, which is nice!

Edited by Pebbles167 on Thursday 2nd November 11:41

[996Type]

RicksAlfas said:

There is something about the child benefit contributing to the state pension contribution of the stay at home parent. I don't know the details, but don't cancel it without checking the ramifications!

Crazy system and as mentioned above you lurch from it being based on one parent's income to both parents if the child goes to university.

Is this possibly that the govt covers the stay at home parents NI payments while the claim is active to ensure maximum pension is retained when the time comes?

This is a timely thread, a family member has just been stung for 3X years worth of repayments, as they are the sole breadwinner and their salary has crept up since the birth of their 10 and 7 year old. They had no need for self assessment prior to this so the repayment came as a bit of a shock.

Just to clarify, say if they are on £75K, is it simply a case of putting £25K pre tax into a pension or other type of sacrifice to meet the £50K threshold to retain the child payments?

Or does the standard tax free amount (circa £12K?) come off the £75K first meaning they only have to sacrifice £13K? ( £75K - £12K = £63K, knock £13K off to get to the £50K).

I expect the issue is that sacrificing £25K pre tax is going to be some going for a sole breadwinner, equivalent to a £15K outgoing post tax, but as this is going to go into a pension (40% benefit / £10K tax saving) and save the tax credits (£2K benefit) plus lower the NI contributions (£600), it might still be something to consider….

[okgo]

£25k as I understand it.

The pillage and idiotic thresholds continue all the way up the salary ladder. I'd say the first bit of clear water you reach as a PAYE employee is once the pension tapering stops at £360k, the endless bumming from the gov stops at that point.

[RicksAlfas]

996Type said:

RicksAlfas said:

There is something about the child benefit contributing to the state pension contribution of the stay at home parent. I don't know the details, but don't cancel it without checking the ramifications!

Crazy system and as mentioned above you lurch from it being based on one parent's income to both parents if the child goes to university.

Is this possibly that the govt covers the stay at home parents NI payments while the claim is active to ensure maximum pension is retained when the time comes?

Yes, that's it. It does work too, so at least that bit is ok!

[Eric Mc]

Pebbles167 said:

Most people i know are/were not aware that child benefit is related to income, probably since we're all mid to low earners.

A new role at work put a colleague over £60k, and HMRC eventually came after him for 3 years worth of payments for several kids, he and his wife had no idea and definitely hurt his wallet.

At least I had some warning, so when I also got this role, I told my girlfriend she had to stop claiming the payment, much to her annoyance. I could have put some into my pension, but at 30 years old, retirement seemed years away, and after having another two children, I'd be giving up a lot of my wage that I need right now.

It's stupid that they do it based on a single household income.

At least we can still claim some tax back for childcare, works out the government top up £25 for every £100 we put in, which is nice!

Edited by Pebbles167 on Thursday 2nd November 11:41

I think stopping the Child Benefit is the worst course of action. It's best to take it and pay it back if necessary.

[mcflurry]

The annoyance to me is that the limit was £50k over a decade ago and hasn't risen since..

According to https://www.hl.co.uk/tools/calculators/inflation-c... 50k of buying power in January 2003 is equal to £117k today

[mikey_b]

Eric Mc said:

Pebbles167 said:

Most people i know are/were not aware that child benefit is related to income, probably since we're all mid to low earners.

A new role at work put a colleague over £60k, and HMRC eventually came after him for 3 years worth of payments for several kids, he and his wife had no idea and definitely hurt his wallet.

At least I had some warning, so when I also got this role, I told my girlfriend she had to stop claiming the payment, much to her annoyance. I could have put some into my pension, but at 30 years old, retirement seemed years away, and after having another two children, I'd be giving up a lot of my wage that I need right now.

It's stupid that they do it based on a single household income.

At least we can still claim some tax back for childcare, works out the government top up £25 for every £100 we put in, which is nice!

Edited by Pebbles167 on Thursday 2nd November 11:41

I think stopping the Child Benefit is the worst course of action. It's best to take it and pay it back if necessary.

I agree. It's been mentioned already, but claiming child benefit allows your wife (and it usually is the wife who's the stay-at-home parent) to get a credit that counts towards annual NI payments for state pension. If you just stop claiming child benefit, then she risks getting gaps in her NI record and in years to come may unexpectedly get a reduced state pension. Also, if the one who's earning suddenly earns less than the threshold (eg redundancy) then you might need that money.

Just take it, put it to one side where it earns some interest, and pay it back in January. Self-assessment doesn't even take an hour to complete if your affairs are otherwise simple.

[johnpsanderson]

Does paying more into your pension to get back under £50k have to be via salary sacrifice?

My work pension provider doesn’t allow for additional pension contributions to be done by salary sacrifice, just the ‘standard’ payments.

[VR99]

I took the decision to stop our child benefit after having a child as currently sole breadwinner.....it's one thing if you are in the 50-60k bracket so definately worth shovelling the extra into pension....but once you go north of £60k on a sole income it becomes harder to justify sacrificing down so aggressively....there has to be a balance unless you are close to retirement in which case fill yer boots with the pension....unless already lucky enough to have the LTA problem looming.

Edited by VR99 on Thursday 2nd November 17:30

[hyperblue]

mikey_b said:

I agree. It's been mentioned already, but claiming child benefit allows your wife (and it usually is the wife who's the stay-at-home parent) to get a credit that counts towards annual NI payments for state pension. If you just stop claiming child benefit, then she risks getting gaps in her NI record and in years to come may unexpectedly get a reduced state pension.

This is not true. You need to opt out using the claim form and will still get NI credits.

https://www.gov.uk/child-benefit-tax-charge#:~:tex...

mikey_b said:

Also, if the one who's earning suddenly earns less than the threshold (eg redundancy) then you might need that money.

Just take it, put it to one .

You can restart payments whenever you need to if circumstances change.

[pork911]

Beethree said:

MattS5 said:

It's a ridiculous system, when 2 people living together can each earn £49,995 per year and still get paid the allowance. (£99,990 family income)

Yet if 1 person earns £50k, that benefit reduces accordingly, up to £60k ,then it dissapears totally. Regardless of what the partner earns.

Yup, absolutely. Basically punishes you for having a partner who wants to stay at home with the kids.

punishes?

[Eric Mc]

hyperblue said:

mikey_b said:

I agree. It's been mentioned already, but claiming child benefit allows your wife (and it usually is the wife who's the stay-at-home parent) to get a credit that counts towards annual NI payments for state pension. If you just stop claiming child benefit, then she risks getting gaps in her NI record and in years to come may unexpectedly get a reduced state pension.

This is not true. You need to opt out using the claim form and will still get NI credits.

https://www.gov.uk/child-benefit-tax-charge#:~:tex...

mikey_b said:

Also, if the one who's earning suddenly earns less than the threshold (eg redundancy) then you might need that money.

Just take it, put it to one .

You can restart payments whenever you need to if circumstances change.

The problem is you must be proactive in order to insure you get the NI credits. Also, even though you can go back to claiming Child Benefit if the circumstances allow you to, you will only get the Child Benefit from the date you requested it be reinstated. That is even if you might have had a period where you were eligible for it but didn't make the claim.

It's a totally crap system dreamed up by posh public school boy George Osborne who is now working in a cushy job as chairman of the British Museum. Maybe they thought that his work on Child Benefit made them think he was an expert on mummies.

[Beethree]

pork911 said:

punishes?

Yup.
If my wife worked full time then I could afford to sacrifice my income to avoid the reduction in child benefit.
We could both earn £49k and get the full amount.

[996Type]

johnpsanderson said:

Does paying more into your pension to get back under £50k have to be via salary sacrifice?

My work pension provider doesn’t allow for additional pension contributions to be done by salary sacrifice, just the ‘standard’ payments.

If necessary set up a SIPP and pay into it within the tax year. Then do self assessment to reclaim the tax relief, tick the box (or get your accountant to) that states you receive the child payments but that your net payments are under £50K. It’s one way round if your firm don’t allow AVC, but worth pushing them as there are NI benefits to them also for letting you pay more in from your gross pre-tax salary….

[sawman]

Beethree said:

pork911 said:

punishes?

Yup.
If my wife worked full time then I could afford to sacrifice my income to avoid the reduction in child benefit.
We could both earn £49k and get the full amount.

Yeah, i have been paying back child benefit for years, just finished with it as all kids at uni/ working, so aside from paying for ridiculously expensive student digs, i now find that i have fallen into the 60% tax trap.
I guess the next thing will be pension age moving on just before I make the current one

[Hondashark]

Pebbles167 said:

I could have put some into my pension, but at 30 years old, retirement seemed years away, and after having another two children, I'd be giving up a lot of my wage that I need right now.

Edited by Pebbles167 on Thursday 2nd November 11:41

Out of the £10k between £50 and £60k you would be giving £6300 back to the gov or £10k in your pension. I just couldn't facing giving all that up.

Stupidly, £50k when it was brought in in 2013 is the equivalent of £70k now yet the government still call it the High Income Child Benefit Charge.

[LastPoster]

Hondashark said:

Out of the £10k between £50 and £60k you would be giving £6300 back to the gov or £10k in your pension. I just couldn't facing giving all that up.

Exactly this. The usual posts above of 'just put it into your pension'. The whole point is that the worst affected are the edge cases who are just over the threshold in a single income household. It's an unfair loss of income now, losing more income now to increase it years down the line won't help

[Eric Mc]

Hondashark said:

Pebbles167 said:

I could have put some into my pension, but at 30 years old, retirement seemed years away, and after having another two children, I'd be giving up a lot of my wage that I need right now.

Edited by Pebbles167 on Thursday 2nd November 11:41

Out of the £10k between £50 and £60k you would be giving £6300 back to the gov or £10k in your pension. I just couldn't facing giving all that up.

Stupidly, £50k when it was brought in in 2013 is the equivalent of £70k now yet the government still call it the High Income Child Benefit Charge.

It's called "Inflation Creep" and is used by Governments as a tool to increase their tax take without actually having to raise any tax rates. You see it all across the tax system - not just regarding this Child Benefit issue.