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Is it worth your family still claiming CB if one of you is a higher rate taxpayer?

(33 Posts)
mamhaf Mon 15-Oct-12 22:19:18

I'm a higher rate taxpayer, and close to the limit of where we would receive no CB when the rules change in January, while DH is a lower rate taxpayer.

He has always been the claimant of CB which goes straight into a savings account in his name.

So, after the rules change in a direct reversal of the principles of independent taxation for couples, taking us back to the 1950s and when we both fill in our tax returns for 2012-13, Revenue & Customs will claim back most of the CB from me. I'm not sure if that'll be via my tax code (I'm PAYE) or if I'll have to pay it as a lump sum.

Any idea anyone?

Also, do you reckon it's worth DH still claiming CB and putting it in a savings account until it's time to pay up? The amount we'd have to pay back would be quite close to the amount claimed, but we would accrue interest on it.

All our salary goes into a joint account, so I'm not keeping him penniless btw, our income is pooled but he has no idea about budgeting and leaves it all to me.

mamhaf Mon 15-Oct-12 22:34:18

Also, does anyone know - if I upped my pension contributions, would that bring down the income that HMRC base the calculation on? thanks.

Alibabaandthe40nappies Mon 15-Oct-12 22:40:08

If your pension comes out before you are paid then yes, it reduces your overall salary so if you are close to the cut-off then it could bring you below.

I claim CB, and DH and I are both looking like being over the threshold for tax year 13-14. I will keep claiming though, because I pay no NI (income is dividends - I'm a SAHM) and CB is how I am keeping my state pension entitlement. Until I see a satisfactory explanation of how else I can retain that entitlement for these years I'm not working then I will keep claiming and we will pay it back in tax.

MrAnchovy Mon 15-Oct-12 23:30:46

HMRC should be writing to you soon (the date keeps slipping) to give you more details, but basically the idea was that you would be able to volunteer to have your tax code adjusted from January 2013 - but they are running out of time to do this now.

I cannot see any disadvantage to carrying on claiming and waiting for it to be clawed back - this is the most reliable way to avoid any HMRC/DWP cock-up.

The calculation is on exactly the same basis as the income you are taxed on, so yes pension contributions will reduce it.

mamhaf Tue 16-Oct-12 08:43:39

Thanks - I'll look into upping my pension contributions today.

Brycie Tue 16-Oct-12 08:47:03

Am claiming for the same reason as AliBabi, I think we will lose about half of it per month, but we are still going to claim and then pay it back. I don't have a pension.

CogitoErgoSometimes Tue 16-Oct-12 12:10:01

"in a direct reversal of the principles of independent taxation for couples, taking us back to the 1950s"

Taxation is still independent but benefit awards have always depended on whether someone is living singly or as part as a couple.

MissWooWoo Tue 16-Oct-12 12:15:54

Taxation is still independent but benefit awards have always depended on whether someone is living singly or as part as a couple

sorry to hijack but can someone please explain this to me? I am recently married having co-habited for the past 12 years. I went online to check what changes there would be to tax/CB etc but could find nothing apart from a married person's tax allowance that only applies if 1 or both of you were born before 1935 (?!) ... or am I totally missing something here?

Brycie Tue 16-Oct-12 12:20:57

Cogito what you said, there seems something unfair about it to me. I don't know what but it doesn't seem right.

MrAnchovy Tue 16-Oct-12 12:25:17

*Taxation is still independent but benefit awards have always depended on whether someone is living singly or as part as a couple

sorry to hijack but can someone please explain this to me?*

Yes - nothing changes for tax purposes whether you are single, co-habiting or married. You have found the exception that proves the rule - the age-related allowances which exist for historical reasons.

And for Child Benefit and all (? I am not a benefits expert) other means tested benefits things change when you are co-habiting whether you are married or not.

CogitoErgoSometimes Tue 16-Oct-12 12:52:42

Any benefit received from the state whether it's housing benefit, tax credits, even the state pension, is judged on a household basis. If you are deemed to be living as a couple, whether you are married or not, then the amount is awarded accordingly. If you lie about you co-habiting status in order to receive an advantage, you're penalised. Child Benefit, being a universal benefit up to now, was an exemption (like the winter fuel allowance) that was dependent neither on marital/co-habiting status or income. .... now it is more in line with other awards.

'Fair' when it comes to benefits has always been that those with the greatest need should get the most.

tribpot Fri 19-Oct-12 00:25:08

But as the payment of it is also used to protect SAHPs in terms of state pension, it has a dual purpose. And its secondary purpose has not yet been satisfactorily superseded. Is that correct? I've been trying to find out about this for a while as my DH is a SAHD.

TheDoctrineOfSnatch Fri 19-Oct-12 00:32:43

Trib your DH should continue to claim and you can repay through your tax return - this means his state pension contributions will comtinue.

MrAnchovy Fri 19-Oct-12 13:32:19

Yes tribpot that is correct. It has been suggested that the CB claim form will be amended so that you can claim the pension credit but not the CB itself but the arrangements have not been finalised, hence my reference to HMRC running out of time.

So the advice remains to carry on claiming and wait for it to be clawed back - this is the most reliable way to avoid any HMRC/DWP cock-up and you will never be worse off this way.

ParsingFancy Fri 19-Oct-12 13:46:37

"'Fair' when it comes to benefits has always been that those with the greatest need should get the most."

Well actually for state pensions and insurance payouts it's long been that those that pay the most get the most.

A principle that Dave, Nick, Gideon and the previous Labour government have strongly promoted, and describe as more "fair". (Incapacity, unemployment and pension benefits made more and more dependent on narrower and narrower National Insurance criteria.)

There's certainly a debate to be had about what we want sort of welfare state we want, large or small. But attempting to present the changes as the preservation of an eternal status quo is a bit odd.

We are just under the threshold, so continue to claim, but does anyone know how it is stopped? How does HMRC know?

TheDoctrineOfSnatch Fri 19-Oct-12 14:02:20

Ilove it isn't stopped. You can write to HMRC and ask for it to stop or you can note it on your tax return and thereby include it in the tax calculation I.e. you will be taxed back the value of the benefit.

tribpot Fri 19-Oct-12 14:45:14

Thanks for the clarifications, Doctrine and MrAnchovy. Does this mean if I need it clawing back in my own tax, I need to do a tax return for myself? I might just leave the country rather than have to do two (as I already do one for my DH).

MrAnchovy Sun 21-Oct-12 23:19:09

It should be the partner with the higher taxable income that is liable for the deduction; HMRC should be using their records to work out who this is but I would imagine wink they are having problems with some of the details (e.g. Jo and Sam live together, they each have a child from a previous relationship and each get CB; their earnings are variable due to commissions and bonuses and neither knows how much the other earns - how are the instructions on the tax return form going to deal with this?)

Probably best to wait until they send the letters out to see if they have got it right.

tribpot Sun 21-Oct-12 23:23:45

I would have thought HMRC have this well under control. So would they reclaim it via PAYE, were I to ask them to? Which naturally I will as soon as their position on this matter is communicated to me formally ...

MrAnchovy Mon 22-Oct-12 00:13:27

"I would have thought HMRC have this well under control."

grin

Watch this page and see what comes out and when. The original date for full details was August, it is currently "autumn". Maybe they are planning it for Guy Fawkes?

"So would they reclaim it via PAYE"

I wouldn't bet anything on this happening in time for January 2013, but it might kick in for 2013/14.

MrAnchovy Mon 22-Oct-12 00:23:18

This isn't HMRC's fault BTW - they pointed out to the Treasury that means testing Child Benefit is all very well in theory but in practice it would cost more to do it properly than it would save. The result is a compromise which noone is really happy with, and all the hard work was dumped on HMRC to go live in less than 12 months on the same date as Universal Credit and Real Time Information - which itself is only being brought in to feed info in to Universal Credit. To make matters worse, Child Benefit and Universal Credit policy is made by DWP so HMRC do all the work and DWP get all the credit.

TheDoctrineOfSnatch Mon 22-Oct-12 06:44:11

Poor old HMRC grin

MrAnchovy Mon 22-Oct-12 10:16:16

Just realised I mentioned that Universal Credit will launch in April 2013 - note that this is a pilot launch in part of the UK for new claimants, the full roll-out to existing claimants is scheduled for April 2014.

gettingdarkoutside Thu 01-Nov-12 19:11:26

Can I check I understand this? Sorry if being dim. I started claiming child benefit when on maternity leave with no income, but now earn over £60k so would lose entitlement from January. My partner is freelance, and some months he earns hardly anything, and overall in a year has never been a higher rate tax payer so it is very useful back-up and I will soon be going on maternity leave for a second time with a period with no income again so we are saving for then. Can he start claiming the CB instead of me? I read somewhere that might help with his NIC contributions in the future as well?

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