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Implication of removal of child benefit for SAHM's with high earning DPs

(42 Posts)
Ferrybridge Mon 24-Sep-12 20:40:16

I think I have spotted a rather large issue which I haven't seen mentioned in the media.

I think most people are more or less in agreement the country can no longer afford to pay CB to high earning families.

However, ATM a SAHM/D (or part-time working below the NI threshold parent) gets state pension credits for each year they claim CB for a child under 12. You need 30 years' contributions to get a full state pension, so it is possible to take a chunk out of your working life to care for a family and still get a full pension at retirement.

However, if your DP earns over the threshold for CB and you (as a couple) therefore stop claiming it, does that mean the non working parent will no longer get the pension credits?

I understand that the govt (IR?) will be writing to top rate tax payers suggesting that they stop claiming, although if you do continue to claim the money (for those no longer entitled) will be clawed back through your DP's tax return.

It seems to me that it is important these letters are ignored and that CB continues to be claimed, even accepting that you will have to pay it back. Is anyone pointing that out to (mostly) women? I am concerned about what happens to people who are no longer with this high earning partner by the time they retire.

MrAnchovy Wed 26-Sep-12 18:03:19

Good grief, I've just listened to Monday's You and Yours (28:30) where self-styled "consumer rights expert" Dean Dunham of youandyourrights.co.uk (or youandyourrights.com, they don't seem to be able to decide who they are) spouted a load of rubbish, and sat by while the presenter gave out incorrect information, that seems to have rekindled a lot of old rumours.

Thankfully they have run a feature on today's You and Yours (46:30) with some sensible and accurate information from Paul Lewis of Radio 4's own Money Box.

Arithmeticulous Wed 26-Sep-12 21:09:06

,So what's the answer- claim then repay, or stop claiming?

Would the repay be in one lump sum?

MrAnchovy Wed 26-Sep-12 22:11:49

The answer is that NOTHING CHANGES WITH CHILD BENEFIT. There will be an extra box on the tax return for 2012/13 for the higher earner to fill in which will result in HMRC collecting the clawback along with any other tax due - usually through a change in tax code.

As tax returns are not due until 31 January 2014 they will be writing to people they think might be caught by this, presumably so that they can have their tax codes adjusted earlier (either from April 2013 or possibly January 2013, although they are running out of time now) to avoid any big lump sums being due.

If there is a lump sum due for January - March 2013 this will presumably be due by 31 January 2014, the normal due date for payment of Income Tax.

The media keep asking if someone eligible for CB can decide not to claim it in order to avoid the claw back, but still have their eligibility for noted for basic state pension accrual purposes and HMRC/DWP have said that there will be an option for this but no details of the procedure have been released, presumably partly because it is anticipated that there will be little demand for this as it creates loads of potential problems for the claimant (separation? redundancy?) and partly because everyone that is responsible for this sort of thing is too busy trying to avoid a complete catastrophy with the introduction of Universal Credit.

Note that they are still working on the finer details of this so not all of this is certain as I have indicated, however the main details have been confirmed:

- No change to entitlement to CB (and therefore no change in basic state pension accrual)
- A person with net taxable income over £60,000 in a household getting CB will have all of that CB clawed back
- A person with net taxable income over £50,000 in a household getting CB will have some of that CB clawed back (1% for every £100 over £50,000)
- Claw back will start from 1 January 2013
- The default mechanism for claw back will be through the tax return; there may be some short form of return for those earning over £50k who do not already complete a tax return

Those 4 things are all you need to know really!

riksti Wed 26-Sep-12 22:15:41

Minor correction - clawback will start from 7 Jan 2013. Agree with the rest

bonzo77 Wed 26-Sep-12 22:39:55

Claw back this January coming? I thought the entitlement didn't change til April. How can they claw back something you were entitled to?

MrAnchovy Wed 26-Sep-12 22:40:20

Thanks - I keep forgetting that bit. I suppose it is because that leaves 13 weeks to 5 April so you lose 1/4 of your CB for 2012/13 instead of 14/52.

MrAnchovy Wed 26-Sep-12 22:49:47

The entitlement changes 7 January 2013 (Finance Act 2012 Sch1 p7).

Arithmeticulous Thu 27-Sep-12 13:29:14

So when DH demands suggests that I stop claiming CB so that he doesn't pay more tax, he's got the wrong end of the stick?

Arithmeticulous Thu 27-Sep-12 13:30:54

As in, he will have the CB clawed back on a monthly basis using a change of tax code, but we should still receive CB in order to protect my NI pension.

Our net income will not change though?

MrAnchovy Thu 27-Sep-12 14:05:32

As in, he will have the CB clawed back on a monthly basis using a change of tax code, but we should still receive CB in order to protect my NI pension.

Exactly that (except that it might take a while for the change of tax code to come through which means that there might be a lump sum to catch up).

Our net income will not change though?

If his taxable income is over £60,000, your joint net income will be exactly the same as if you didn't claim CB (i.e. it will go down by the amount of CB you are currently receiving).

PoppyWearer Thu 27-Sep-12 14:15:57

Thank you for this thread, had no idea this was happening. At least I now know!

LonelyCloud Thu 27-Sep-12 22:25:17

I wonder how much all this will cost HMRC to administer?

MrAnchovy Thu 27-Sep-12 23:15:58

£22m-£25m a year according to the Tax Information and Impact Note (TIIN) published at Budget time. It is set to claw back over £600m a year.

princessnumber2 Thu 27-Sep-12 23:32:36

If I'm a sahm (earning zilch) and claim cb and Dh earns over 60k but all paye so doesnt do a tax return - how do they claw it back? Are we supposed to ask to do a tax return? I'm reluctant to stop claiming (particularly as we've just had an almighty row - but that's another thread...) surely we're not expected to volunteer to do a tax return? (shudders at already huge pile of family admin, wills to write etc)

MrAnchovy Fri 28-Sep-12 00:03:17

They will be writing to your DH shortly (Autumn September October/November?) (assuming their systems have correctly matched his tax record with your CB record) asking him to fill in some kind of return. It could be done without a full tax return, but the details have not yet been finalised.

MrAnchovy Fri 28-Sep-12 00:06:14

I believe HMRC statistics at Budget time said there were 500,000 people in your position. Note that he may well be better off if he fills in a tax return - there is often additional tax to claim on pension contributions, and if you have made any charity payments that can be treated as gift aid there will definately be some there too.

princessnumber2 Fri 28-Sep-12 08:41:34

Thanks for the info MrA. I'll look forward to another form. wink

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