question about child benefit

[hellosailor]

Can someone please remind me about the threshold for child benefit?

I only remember it's been made unfair so that a couple with a much higher joint income still get it but if there's one earner above a certain threshold they don't even tho the household income could be much less than the couple both earning, but I don't remember the figures! What's the deal with it again?

thanks!

[Pickle]

?50,000 is the individual amount I think.

[LondonMix]

It's a sliding scale. You start partially losing it at 50k and its fully withdrawn at 60k. It does apply to any one parents earning rather than joint household earnings.

[hellosailor]

So if one of you is working and is paid just over ?50,000 then you don't get child benefit? But if, say, you earn ?48k each, and have a joint income of ?96K you would still get it?

[hellosailor]

cross post with Londonmix there..

[LondonMix]

Yeah, they've done it that way for a few reasons. Technically, there is no such thing as joint-tax assessments in the UK. More importantly though, if they had made the test 50k household income, it would have affected too many people (as it stand only 15% of families are estimated to be affected by the proposal as is). If they had made the test 100k per household it would affect far too few people to save the government any money. I can understand why it might leave a bitter taste in the mouth though for single parents who are caught up in this earning 60k.

[etta166]

Also not widely publicised is that it's not your gross income that counts, but your net adjusted income. It's a bit more complicated than this, but net adjusted income is basically the income that you pay tax on. Various things get deducted from your total income like gift aid donations, childcare vouchers, persion payments and other salary sacrifice amounts. So you can actually earn quite a lot more than 50K and keep all your child benefit, especially if you donate a lot to charity or make huge pension contributions.

It's probably best to consult an accountant if your situation is not really clear-cut, like one person earing loads more than 60K.

[hellosailor]

thanks all, that's useful to know

[KateW]

Your Child Benefit is reduced by 1% for every ?100 you earn over ?50k, so for example, if you earn ?55k, you will lose half your CB, which is why it is withdrawn once you reach ?60k.

[goldilocks]

You can however continue to claim it and then pay the tax on it. There was some discussion about this maintaining NI conts if you're not working. I'm not 100% sure what the latest position on this is but worth looking into

[Sonners]

goldilocks Wrote:

-------------------------------------------------------

> You can however continue to claim it and then pay

> the tax on it. There was some discussion about

> this maintaining NI conts if you're not working.

> I'm not 100% sure what the latest position on this

> is but worth looking into

You can avoid the complication of receiving the benefit and paying it back via a tax return by claiming and electing not to receive the money which keeps your NI being franked for a parent who stays at home. Sending off the claim form also gets an NI number issued for new babies.

[Mrs TP]

It is so annoying and contradicts itself.

As LondonMix says 'Technically, there is no such thing as joint-tax assessments in the UK' - the gov't are using this line in their defence of not considering household incomes but on assessing individual wage earners.

However, where there is a single higher tax earner it is usual for the other partner to apply for and receive the child benefit. So the non-working partner looses their benefit or if they continue to receive it then the wage earner is taxed on it - so in this instance joint taxing is allowed. It's bullshit.

[etta166]

A lot of benefits are assessed on household income, not the income of the person claiming. It is bizarre to have a different threshold for joint income and individual income, but it's fairly consistent with the approach to things like working tax credit and child tax credit to consider the income of the household for child benefit too.

[Knomester]

I am probably being really dim, but is our entitlement to CB calculated for us or do we need to do that ourselves and opt out if necessary? We are still receiving it and I have never received any correspondence about it. Am I wrong to just assume that we are still entitled to it?

[LondonMix]

If you or your partner make over 50k, you won't be entitled to all of it anymore. It will need to be given back (in full or in part depending on how much you earn) to the government when the higher-earner does their tax-return. If either of you make more than 60k, it would be simplier to just opt out. The new rules start in April I think.

[Knomester]

Thank you. I'll have to take a look at the blurb and work it out then!

[etta166]

Knomester Wrote:

-------------------------------------------------------

> I am probably being really dim, but is our

> entitlement to CB calculated for us or do we need

> to do that ourselves and opt out if necessary? We

> are still receiving it and I have never received

> any correspondence about it. Am I wrong to just

> assume that we are still entitled to it?

The onus is on you as a couple to work out what you are entitled to, if any, and then either opt out or file a tax return (due to be filed by Jan 2014 in respect of the previous year's tax). Anything that you've claimed since January 2013 is subject to the new rules. The higher earner has to file the tax return, or either of you can if you both earn the same amount.

All ethical/moral considerations aside, the practicalites of working out what you are entitled to are very complicated, because it's not your salary that counts but your net adjusted income. This has to be over 50K for you to start losing the benfit and over 60K to lose it all. At some point you might decide that it's just not worth the hassle and opt out to save having to do a tax return each year...

At the moment, you also need a current child benefit document to take up a school place in Southwark (as proof of address for the child). Not claiming child benefit at all, rather than claiming and opting out, could have other consequences as well in respect of your NI history and future entitlement to state benefits.

[catgirl]

I believe the new rules started on jan 7th

[LondonMix]

Sorry, January, I stand corrected. The net income rule isn't that complicated. It's how all taxes are calcuated, though if you've never had to do a tax return before, I can see you'll need to think about it.

[Blueskies]

When we looked into this I found that the situation if you are in the 50-60k bracket was more complex than the hmrc literature made out, it implied if your pay was over 60k you would definitely loose all cb. However, As someone else said, the figure you need to know is your taxable income after pension contribution and any other salary sacrifice money comes off, and also gift aid donations too i believe. If you earn 60k if may be that these items bring you below 60k in which are you are still entitled to some cb although you need to register for self assessment and complete a tax return and pay back any that is over the amount you are entitled to.

[LondonMix]

Yes, for tax purposes your taxable income is always what's used. Anything that reduces you taxable income (ie anything you that you've been told comes with tax benefits) is taken into account. For most people, this will be pension contributions, salary sacrifice schemes for (cyclescheme / child care vouchers) and charitable contributions. However, if you tick the box saying that you are giving the charity your tax relief, then it you need to gross up. Unless you are involved in something crazy it should be quite straight-forward (at least compared to doing US taxes...).

[etta166]

OK, so it's not unfathomable but it's not clear-cut either. One person could earn, say ?56K, but donate ?2K to charity, get the full allowance of childcare vouchers, have a cycle-to-work scheme bike and make ?2K of pension contributions and thereby keep all their child benefit. Another person could earn ?55K but do none of the above, and so lose half of the child benefit in extra income tax.

HMRC have presented it very much as "if you earn X amount, you lose X% of the child benefit". It's not that simple.

[LondonMix]

That's true and perhaps its because I have to do US taxes (which are complicated) and already have to file a UK tax return , it doesn't strike me the way it does you.

HMRC always present information as "if you make X you pay Y etc". When you sign a salary sacrifice form etc, it makes it rather clear that for all purposes your income is not considered what it was by HMRC. My only point is, this isn't unique to child benefit. This is just how HMRC always calculate taxes and liabilities of all sorts. They didn't highlight this nuance because its standard.

The complication is that people who don't normally have to file tax returns and have all of this done for them through PAYE are having to think about it for the first time if you see what I mean. A lot of people are now being dragged into the tax return system without much background. The good news is that UK taxes are relatively quite simple (though HMRC can be a total nightmare to deal with if anything goes wrong).

[Blueskies]

Indeed, and a lot of people who have their tax etc all done by employers will undoubtably find it harder than someone used to dealing with the tax system.

Also, think its hard for people whose circumstances have changed in the current tax year to know definitively if they are not entitled to any cb, e.g if one increases pension contributions or buys more child care vouchers, or got a pay rise to bring total pay to 60k mark. Now I'm sure it would be possible to work to out, but may be quite time consuming. or you could wait for your p60 which will say definitively. But of course you will need to do self assessment and submit in jan next year if you do that...

But I would say that definitely make sure children still registered on cb system, And any future children too, and just opt out of payments (if you decide it's easier this way). This is so that the carer continues to build up national insurance credits, meaning that if you don't work for a period of time (until the child is 12 i believe but dont quote me) due to bringing up children that this time out of the workforce won't affect entitlement to state pension.

[LondonMix]

Yes, agree with all of that but I don't want people to get the impression that its harder than it is just because its unfamiliar. If you are on the cusp and want to work out where you stand, it shouldn't take you more than 5 minutes to do the math unless you have a very unique and complicated set-up. If you know how many childcare vouchers you want to buy via salary sacrifice and you know how much you want to contribute to your pension etc, it really is very simple to work out.