Child benefit tax
Author
Discussion

PurpleMoonlight

Original Poster:

22,362 posts

187 months

Wednesday 28th March 2018
quotequote all
Is my understanding correct?

For two children the total tax rate (income tax, ni & child benefit tax) total pretty much 60% of gross earnings?

Eric Mc

125,681 posts

295 months

Wednesday 28th March 2018
quotequote all
What are you referring to?


PurpleMoonlight

Original Poster:

22,362 posts

187 months

Wednesday 28th March 2018
quotequote all
I'm looking at the net pay position of earnings in excess of £50,000

The taxes seem to be:

Income tax 40%
NI 2%
Child benefit tax 17.5%

CzechItOut

2,156 posts

221 months

Wednesday 28th March 2018
quotequote all
You pay back 1% of your child benefit for every extra £100 you earn over £50k.

I'm not sure how you got to the 17.5% figure.

PurpleMoonlight

Original Poster:

22,362 posts

187 months

Wednesday 28th March 2018
quotequote all
CzechItOut said:
You pay back 1% of your child benefit for every extra £100 you earn over £50k.

I'm not sure how you got to the 17.5% figure.
Child benefit for two children is about £1750 pa

£1,000 salary over £50,000 means a 10% reduction in CB, being £175, being 17.5% of £1,000.

Eric Mc

125,681 posts

295 months

Wednesday 28th March 2018
quotequote all
And?

Is not better to get something?

PurpleMoonlight

Original Poster:

22,362 posts

187 months

Wednesday 28th March 2018
quotequote all
Eric Mc said:
And?

Is not better to get something?
You mean the 40% left?

randlemarcus

13,646 posts

261 months

Wednesday 28th March 2018
quotequote all
Wait until you get to the 100-120K bit of thievery smile

rsbmw

3,466 posts

135 months

Wednesday 28th March 2018
quotequote all
You seem to be forgetting you have already been paid the £1750, so even paying back 10% of that (in your example) leaves you £1575 up.

CzechItOut

2,156 posts

221 months

Wednesday 28th March 2018
quotequote all
PurpleMoonlight said:
Child benefit for two children is about £1750 pa

£1,000 salary over £50,000 means a 10% reduction in CB, being £175, being 17.5% of £1,000.
I see what you mean, yes you're right it works out as 17.5% for earnings between £50k and £60k

rsbmw

3,466 posts

135 months

Wednesday 28th March 2018
quotequote all
Except it doesn't, it simply offsets the benefit and works out neutral

oyster

13,747 posts

278 months

Wednesday 28th March 2018
quotequote all
If you earn more than £50k the effective tax rates between £50k and £60k are as follows:

1 child - 52.8% tax
2 children - 59.9% tax
3 children - 67.0%
4 children - 74.1%
5 children - 81.3%

Extreme example, but a £60k earner with 8 children takes home less than a £50k earner with 8 children.


Apparently this policy was introduced by the party of financial and economic astuteness!


PurpleMoonlight

Original Poster:

22,362 posts

187 months

Wednesday 28th March 2018
quotequote all
oyster said:
If you earn more than £50k the effective tax rates between £50k and £60k are as follows:

1 child - 52.8% tax
2 children - 59.9% tax
3 children - 67.0%
4 children - 74.1%
5 children - 81.3%

Extreme example, but a £60k earner with 8 children takes home less than a £50k earner with 8 children.


Apparently this policy was introduced by the party of financial and economic astuteness!
Got to be one of the worst thought out Government clawbacks ever.

rolleyes

Eric Mc

125,681 posts

295 months

Wednesday 28th March 2018
quotequote all
PurpleMoonlight said:
Got to be one of the worst thought out Government clawbacks ever.

rolleyes
They wanted to means test people in order to assess whether people over a certain level of income should receive the benefit (for decades it was paid out with no overview of the recipients income levels). Everybody with children was entitled to receive it - whether they were rich or poor.

The problem with means testing a benefit is that you create a whole new level of bureaucratic administration that needs to be allocate, to test, to check, to review and to decide on whether the benefit can be paid or not.

The simple expedient was to turn the assessment over to the individual to assess themselves under "Self Assessment". However, to make it simpler, they did not include a number of tests and restrictions that should have been included to make the clawback fair. And they also dragged hundreds of thousands of people into Self Assessment who hadn't been included previously. Indeed, there are still thousands of people receiving the benefit today who should not really be doing so.

HMRC hopes that the personal Digital Tax Account system will solve these issues (pardon me whilst I roll around the floor laughing).

PurpleMoonlight

Original Poster:

22,362 posts

187 months

Wednesday 28th March 2018
quotequote all
And, as is Government practice, the level the clawback commences hasn't increased so more people get caught up in it (which is why I asked as I am assisting an employee).

skinnyman

1,895 posts

123 months

Wednesday 28th March 2018
quotequote all
Personally I found the system of being given the money monthly, and then having to pay it all back at the end of the tax year (plus the piss poor HMRC website) such a pain in the arse that I had ours stopped.

For PAYE employees I don't know why they don't just adjust your income tax accordingly

Eric Mc

125,681 posts

295 months

Wednesday 28th March 2018
quotequote all
Have you checked all the non-tax ramifications of actually stopping it though?

LivingTheDream

1,768 posts

209 months

Wednesday 28th March 2018
quotequote all
oyster said:
If you earn more than £50k the effective tax rates between £50k and £60k are as follows:

1 child - 52.8% tax
2 children - 59.9% tax
3 children - 67.0%
4 children - 74.1%
5 children - 81.3%

Extreme example, but a £60k earner with 8 children takes home less than a £50k earner with 8 children.


Apparently this policy was introduced by the party of financial and economic astuteness!
and a couple earning £99k between them doesn't pay a penny back

PurpleMoonlight

Original Poster:

22,362 posts

187 months

Wednesday 28th March 2018
quotequote all
LivingTheDream said:
and a couple earning £99k between them doesn't pay a penny back
Only if apportioned equally.

anonymous-user

84 months

Wednesday 28th March 2018
quotequote all
skinnyman said:
Personally I found the system of being given the money monthly, and then having to pay it all back at the end of the tax year (plus the piss poor HMRC website) such a pain in the arse that I had ours stopped.

For PAYE employees I don't know why they don't just adjust your income tax accordingly
Missing out on NI credits towards pension!

What’s difficult about paying it back?