Child Benefit Tax Charge

[Chicken Chaser]

Puzzles said:

yep the 'wealthy'

Edited by Puzzles on Monday 15th January 22:41

Yet those on a £60k single income are earning far less than 2 on average incomes. I've got friends whose household income is nearly £100k yet they still get it in full. It is a crazy and punitive tax. I didnt really consider the marginal rate but given i'm going through the upper limit with overtime this year, I really need to consider my options. I've been saving hard to get a decent buffer, and to put some money away for the medium term (10-12 years) but I wont retire for another 18 years. It seems like in doing so, i'd probably be better off just missing out the medium term and sticking it in my AVCs. Its just a lot to bank for something when i'm 60 rather than having a decent slush fund in my early 50s.

[Chris Type R]

Chicken Chaser said:

Puzzles said:

yep the 'wealthy'

Edited by Puzzles on Monday 15th January 22:41

Yet those on a £60k single income are earning far less than 2 on average incomes. I've got friends whose household income is nearly £100k yet they still get it in full. It is a crazy and punitive tax. I didnt really consider the marginal rate but given i'm going through the upper limit with overtime this year, I really need to consider my options. I've been saving hard to get a decent buffer, and to put some money away for the medium term (10-12 years) but I wont retire for another 18 years. It seems like in doing so, i'd probably be better off just missing out the medium term and sticking it in my AVCs. Its just a lot to bank for something when i'm 60 rather than having a decent slush fund in my early 50s.

You could take the view that you have access to your 25% tax free lump in your 50s ... if this continues to exist. It draws the 'reward' a bit closer in terms of motivation - even if not made use of.

[duckson]

Hub said:

I think I will also fall into the CBTC trap this year. I already have some salary sacrifice, but with a recent pay rise taxable pay will still exceed the threshold by the end of the year. I also have messed up a bit with savings so I'll potentially be over the tax threshold on that too, particularly if I'm now deemed higher rate - I know that savings interest over £500 in affected accounts would be taxed, but if I'm over the savings allowance I presume that will also count as income which will increase the amount of child benefit needing to be paid back? (and all savings interest or just the taxable element counting as income for the purposes of the CBTC?)

Will have to sort myself out for next year!

I'm guessing it is best to wait for my P60 before doing the self assessment?

Any non-ISA interest (ANY) is added to your total taxable earnings, so if you’ve earn’t £700 interest and have £50000 in taxable earnings then your total is £50700 and you will need to do a self assessment and pay some Chikd Benefit back.

There is still time to divert money to a pension to reduce this total under £50k if you wish to do so.

Eg for myself I’ll have about £170 in interest as most cash is in my ISA(which the interest isn’t included in the total) or in my wife’s name (she has a £1000 limit) but I’ll be over the £50k even though I’ve maxed my monthly Pension contribution to the highest I can (12.59%, final salary pension) and pay some AVC’s monthly.
So I’m making a one off contribution to my AVC in March to reduce this so my taxable salary plus interest is kept under £50k and any bonus I get in March is also diverted to my AVC.

[princeperch]

I am caught by this in a big way.

I earn abiut 66k paye and about another 500 quid in savings interest (outside of an isa).

My wife earns less than 50k so no need to worry abiht her income (although if she stops being part time she will go over 50k and that will cause me another headache).

So what I do is as follows:

1) overpay my work pension paye by 250 gross a month.

2)pay the mandatory 450 a month into my work pension

3) then chuck 8 grand into a vanguard pension I've set up and that should see me just below 50k net adjusted income for me to get the 2k or whatever it is child benefit (which would require me to earn 4k gross to get that net).

My problem (if it is one) is that I'm going to be massively over pensioned. My employer puts about 1200 a month into my pension so the figures are quite disproportionate compared to my Income really but I guess it's a nice problem to have.

The vanguard pension should bridge the difference between me retiring at 57(ish) and drawing my civil service pension at 60(ish). I'm going to keep chucking the money into vanguard for as long as I can.

[okgo]

I think you’re on a DB pension no?

Not sure anyone can tell if you’re over pensioned or not without knowing specifics. But I doubt anyone on a DC pension is going to be over pensioned unless putting in significant figures or has a huge employer contribution.

[WhiskyDisco]

Puzzles said:

WhiskyDisco said:

40% marginal to 77% (plus 2% NI so it's actually 79%)

I was counting 20% + 10% NI in the basic rate band to your 77% rate (now 79% )

Ah yes - the pre-£50k band is 30% as you say.

[princeperch]

okgo said:

I think you’re on a DB pension no?

Not sure anyone can tell if you’re over pensioned or not without knowing specifics. But I doubt anyone on a DC pension is going to be over pensioned unless putting in significant figures or has a huge employer contribution.

It's dc but career average rather than final salary with a 1/47 divisor.

I'd rather jump off a bridge than do 47 years so even going at 60 I'll have a fairly lumpy actuarial reduction. I think if I can leave the dc pension until I'm 60 ill get about 40k a year give or take.

My missus is a teacher but, like me, she has eskhewed promotions and responsibility so I think her pension will be about 30k a year if she goes at around the same age. I don't think we'll need more than 70k or so in retirement so the figures are roughly OK.

When I say over pensioned perhaps what I meant is I'm chucking money into the pension which would ordinarily be chucked into savings or an isa. It's definitely giving me less flex doing it this way and it's a drag on my disposable income but it's free money really. So hard to say no to.

I always think as long as I can pay the mortgage and go on a couple of holidays a year and the kids have all they need then I'll carry on. If I had to sacrifice any of those things then it would be different. A reduction in fiscal drag would be most welcome from the government (but I'd still rather cut off all my arms and legs than ever vote for them).

[phil-sti]

duckson said:

Hub said:

I think I will also fall into the CBTC trap this year. I already have some salary sacrifice, but with a recent pay rise taxable pay will still exceed the threshold by the end of the year. I also have messed up a bit with savings so I'll potentially be over the tax threshold on that too, particularly if I'm now deemed higher rate - I know that savings interest over £500 in affected accounts would be taxed, but if I'm over the savings allowance I presume that will also count as income which will increase the amount of child benefit needing to be paid back? (and all savings interest or just the taxable element counting as income for the purposes of the CBTC?)

Will have to sort myself out for next year!

I'm guessing it is best to wait for my P60 before doing the self assessment?

Any non-ISA interest (ANY) is added to your total taxable earnings, so if you’ve earn’t £700 interest and have £50000 in taxable earnings then your total is £50700 and you will need to do a self assessment and pay some Chikd Benefit back.

There is still time to divert money to a pension to reduce this total under £50k if you wish to do so.

Eg for myself I’ll have about £170 in interest as most cash is in my ISA(which the interest isn’t included in the total) or in my wife’s name (she has a £1000 limit) but I’ll be over the £50k even though I’ve maxed my monthly Pension contribution to the highest I can (12.59%, final salary pension) and pay some AVC’s monthly.
So I’m making a one off contribution to my AVC in March to reduce this so my taxable salary plus interest is kept under £50k and any bonus I get in March is also diverted to my AVC.

Seems like a lot of effort for what is about £980 a year. just opt out of it.

[Eric Mc]

phil-sti said:

Seems like a lot of effort for what is about £980 a year. just opt out of it.

That's what George always hoped would be the outcome - i.e. don't bother making a claim to which you are legally entitled because it's just too much hassle.

[duckson]

phil-sti said:

duckson said:

Hub said:

I think I will also fall into the CBTC trap this year. I already have some salary sacrifice, but with a recent pay rise taxable pay will still exceed the threshold by the end of the year. I also have messed up a bit with savings so I'll potentially be over the tax threshold on that too, particularly if I'm now deemed higher rate - I know that savings interest over £500 in affected accounts would be taxed, but if I'm over the savings allowance I presume that will also count as income which will increase the amount of child benefit needing to be paid back? (and all savings interest or just the taxable element counting as income for the purposes of the CBTC?)

Will have to sort myself out for next year!

I'm guessing it is best to wait for my P60 before doing the self assessment?

Any non-ISA interest (ANY) is added to your total taxable earnings, so if you’ve earn’t £700 interest and have £50000 in taxable earnings then your total is £50700 and you will need to do a self assessment and pay some Chikd Benefit back.

There is still time to divert money to a pension to reduce this total under £50k if you wish to do so.

Eg for myself I’ll have about £170 in interest as most cash is in my ISA(which the interest isn’t included in the total) or in my wife’s name (she has a £1000 limit) but I’ll be over the £50k even though I’ve maxed my monthly Pension contribution to the highest I can (12.59%, final salary pension) and pay some AVC’s monthly.
So I’m making a one off contribution to my AVC in March to reduce this so my taxable salary plus interest is kept under £50k and any bonus I get in March is also diverted to my AVC.

Seems like a lot of effort for what is about £980 a year. just opt out of it.

It’s a 5 minute form and email so no hassle.
Effective tax rate of earnings over £50k would be circa 65%.
My CB is just over £2k a year for me currently.
My mortgage is paid off in May so that’s another £760 month in my hand so don’t really need a few extra pounds and it’s more worthwhile in my Pension, once I’m not liable to be paying CB back I’ll not bother too much going over £50k.

YMMV, everyone’s situation is different.

Edited by duckson on Tuesday 16th January 12:36

[Puzzles]

princeperch said:

I am caught by this in a big way.


My problem (if it is one) is that I'm going to be massively over pensioned. My employer puts about 1200 a month into my pension so the figures are quite disproportionate compared to my Income really but I guess it's a nice problem to have.

This is true, maybe retire as early as you can.

But, how long can you survive on 50k a year? If the bands don't move and inflation continues how long can you last before you need the cash.

I do see this squeeze happening a lot.

[princeperch]

Puzzles said:

This is true, maybe retire as early as you can.

But, how long can you survive on 50k a year? If the bands don't move and inflation continues how long can you last before you need the cash.

I do see this squeeze happening a lot.

50k a year is manageable. I've got a cheap mortgage for the next 3 years at 0.99pc. When that renews if rates stay high I can pump 100k into the balance to keep the payments where they are for now. Not planning on moving from here really. The mortgage should be gone by the time I'm 49. I'm 38 at the moment.

The public sector doesn't exactly fall over itself to give out meaningful pay rises so I don't see an issue with keeping on for the foreseeable. It would be an issue if I were getting large pay rises but I only see 3/4pc payrise for the future.

[Chicken Chaser]

I'm just working it all out at the moment. As I've never had to do this in my previous job, say you earned £55k a year but then put £5k a year into your pension, would you effectively claim the whole amount of CB as earnings are under £50k?

Did we say the marginal rate was 65% between £50-60k if your claiming for 2 kids?

[Hondashark]

Chicken Chaser said:

I'm just working it all out at the moment. As I've never had to do this in my previous job, say you earned £55k a year but then put £5k a year into your pension, would you effectively claim the whole amount of CB as earnings are under £50k?

Did we say the marginal rate was 65% between £50-60k if your claiming for 2 kids?

Yes and yes it is for me. 40% tax, 4% NI and 21p in every £ return of the CB

[ChrisNic]

LastPoster said:

Feel free to tell me it's none of my business but out of interest, do you have a good second income into the household? My issue with this bit of terrible policy is that the line is often "salary sacrifice so you don't lose it" but on as good as a single income I just couldn't afford to

The irony being that in an effort to save a benefit cost, the government have provided a great avenue for those that can afford to retain CB and pay lower tax overall.

Not a dig at you, a dig at the system

You are absolutely right. My wife has an income of slightly under £50k so we are optimising what is wrong with the system.

If it were a sole income it wouldn’t be sustainable without significant compromise.

If/when they change the current model I wouldn’t be surprised if they increased the sole income limit to £65-£70k before clawback and put a cap on joint incomes of maybe £80k.

[theboss]

ChrisNic said:

You are absolutely right. My wife has an income of slightly under £50k so we are optimising what is wrong with the system.

If it were a sole income it wouldn’t be sustainable without significant compromise.

If/when they change the current model I wouldn’t be surprised if they increased the sole income limit to £65-£70k before clawback and put a cap on joint incomes of maybe £80k.

Or they could remove the layers of complexity and administration, make it universal again and call it a minor tax concession for families earning more than £70k who already shoulder an unreasonable tax burden.

But of course it would go down like a cold cup of sick with the screeching left / benefits brigade.

[Chicken Chaser]

By the time they get around to sorting this out, we will have probably had pay rises through inflation which means we will be stuck in the same position again.

[theboss]

Chicken Chaser said:

By the time they get around to sorting this out, we will have probably had pay rises through inflation which means we will be stuck in the same position again.

Indeed. By which point NWM earners will be paying additional rate tax and we'll all be rich.

[alangla]

theboss said:

Indeed. By which point NWM earners will be paying additional rate tax and we'll all be rich.

You are Shona Robison AICMF(Clydesdale Bank)P.

[Chicken Chaser]

It's a point for another thread but it's tiresome seeing them ream us for tax in an unfair system. They need to introduce some kind of wealth tax on the super rich and start taxing their assets rather than income. It seems no one ever goes after the potential billions of ££s from a handful of individuals but they're more than happy to scalp us lot who are just trying to earn a decent standard of living for our families