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Idiots guide to child benefit changes please!

(75 Posts)
bangersmashandbeans Mon 03-Dec-12 16:31:15

My husband earns just over 50k but with bonuses etc it is over 60k. Can someone please explain what we do about child benefit when it changes in January? It is calculated on 'adjusted net income' - what does this mean?! Is it the figure after pension contributions but before income tax and other taxable deductions? Have looked on various websites but can't make sense of it. Thanks!

vj32 Mon 03-Dec-12 19:09:32

Don't do anything. Keep claiming. HMRC will claim it back after your DH does his tax return.

bangersmashandbeans Mon 03-Dec-12 19:34:13

He's on paye so doesn't do one?

ihategeorgeosborne Mon 03-Dec-12 20:44:53

I believe adjusted net income is taxable income less certain tax reliefs, i.e. pension contributions, charitable donations, etc. We are in the same situation, as dh is PAYE, but I believe they will now have to start filling in a tax return and including that their spouse claims child benefit for X kids. Having said that, dh hasn't received his letter yet!

Ponders Mon 03-Dec-12 20:49:50

'Adjusted net income is calculated in a series of steps.
The starting point is “net income” which is the total of the individual’s income subject to income tax less specified deductions, the most important of which are trading losses and payments made gross to pension schemes.
This net income is then reduced by the grossed-up amount of the individual’s gift contributions and the grossed-up amount of the individual’s pension contributions which have received tax relief at source.
The final step is to add back any relief for payments to trade unions or police organisations deducted in arriving at the individual’s net income.
The result is the individual’s adjusted net income.'

from hmrc document

it is possible to cut your adjusted net income below the threshold by increasing pension payments.

does your DH get any benefits though? (eg company car, health insurance?) only those are added on

Ponders Mon 03-Dec-12 20:52:50

'the grossed-up amount of the individual’s pension contributions which have received tax relief at source'

means that if he pays eg £80pm into a pension, that's the net amount, & the grossed-up amount (ie before tax at 20%) is £100

bangersmashandbeans Mon 03-Dec-12 21:06:37

Okay...so in laymans terms I look at his payslip, take the figure after tax and pension but before car and other benefits are deducted and then add the pension plus 20% back on? Sorry if I sound stupid!

Lonecatwithkitten Mon 03-Dec-12 21:19:56

His P60 should make it all clearer as this will show his taxable income.

Ponders Mon 03-Dec-12 21:20:30

if he has a car & other benefits as well, then his gross income is actually even higher.

HMRC deduct a taxable value for those from his basic tax code in order to make him pay more tax; you need his tax coding notice to find out what those taxable values are, then add those to his gross income, & deduct his pension contributions plus 25% (sorry, it is confusing! His contributuons represent 80% of the gross-up amount, so to work that out you have to divide his contributions by 4 & multiply by 5)

it sounds as if you probably will lose the net value of your child benefit from his taxable income; but it's important to you to keep claiming it anyway as it gives you credits towards your future pension - another hmrc link

Ponders Mon 03-Dec-12 21:23:26

the latest P60 is for the 11-12 tax year though, & the one for 12-13 won't be available until May or June? (some time after April anyway)

but if his earnings for both years are roughly comparable, bangers, then last year's P60 will help.

bangersmashandbeans Mon 03-Dec-12 21:32:08

And the sodding government are expecting us joe bloggs normal people to be able to work this out?! Are they fecking serious??!! I consider myself quite a bright well educated person and my head is in a spin! Thank you all for trying to explain it to me though. Don't get why they are trying to change it from
January when it make so much more sense to do it starting from the next financial year? Due to bonuses etc last years P60 won't reflect this years earnings at all. confused

ihategeorgeosborne Mon 03-Dec-12 21:32:51

It might be worth paying £100 or so to see a tax accountant? If you are well over the threshold, i.e. above 60k, then it is probably not worth trying to salvage it. However, if your net adjusted income brought you down to say mid fifties, then it might be worth looking into other options. It obviously depends on how many dc you have too. If you have 2+ then it might well be worth looking into this. We have decided to just take the hit next year as we will lose about 60% for three months. However, next year, dh will pay more into his pension, as 60% of 2.5k is actually quite significant.

Ponders Mon 03-Dec-12 21:41:50

s'bloody Gideon, innit. He loves to confuse & he will have access to top accountants 24/7. Bastard

ihategeorgeosborne Mon 03-Dec-12 21:45:15

Well, it has to said, "I hate George Osborne", but I expect you can probably tell!! grin

bangersmashandbeans Mon 03-Dec-12 21:49:32

It's just such a nonsense how complicated they make it. Why can't it just be that if you earn over x amount you get nothing. I have no issue with it being looked at because it's crazy that everyone gets the same at the moment whether you're a gazzilionaire or not but they make it such an unworkable system. I swear they are all aliens in that bloody government.

ihategeorgeosborne Mon 03-Dec-12 21:51:09

I wonder what goodies he'll have in store for us in his Autumn budget on Wednesday? I live in dread of his budgets. There's not much left he can take from us now apart from tax relief on pensions, NHS and schools!!!!

purpleroses Mon 03-Dec-12 21:52:29

If you're unsure of his precise earnings, and it's possibly it will be a little under £60,000 (eg if the amount of the bonus is not certain) then it's best to go on claiming CB, and have him pay it back. He may not have to pay it all back. A self-completion tax return is really quite simple to fill in if your earnings are all from your job, and the HMRC can answer questions on it if he has any problems.

I think you might also want to see if he could pay more money into a pension, as that would increase the child-benefit you get.

Ponders Mon 03-Dec-12 21:53:35

what's worst of all is that they've made it individual income, not family - OK they've raised the threshold (a bit), & introduced a sliding scale (a bit), but the fact remains that a 2x £45K income family will be unaffected.

(NB this is not personal - my kids are all over 18. Still makes me cross, though)

ihategeorge, you must have been surprised that name was available grin

ihategeorgeosborne Mon 03-Dec-12 21:58:21

I'm sure they will find out in time that it is unworkable as it currently stands, but for now they will plough on with it. I wouldn't be surprised if they don't revise it a year or so down the line, particularly when HMRC are inundated with 500,000 extra tax returns. I expect the cock-ups relating to this will be wide spread and in the news constantly. Still, they were warned and chose not to listen. It should all blow up in time for May 2015 grin

bangersmashandbeans Mon 03-Dec-12 22:04:01

That's interesting about the pensions bit as from January his contributions are going up by about 4-5% so I guess we'll keep claiming and look at it again in feb/march. So sue me mr Osborne!

ihategeorgeosborne Mon 03-Dec-12 22:04:59

Ponders, yes I was surprised!! This policy aside, the man really gives me the creeps and scares me TBH.

MrAnchovy Tue 04-Dec-12 03:16:46

Why can't it just be that if you earn over x amount you get nothing.

Because then you would have the ridiculous situation where if you earned X less £50 and got a £100 pay rise you could be thousands of pounds worse off.

Not all pensions work the same way BTW - and if your DH's pension works the way that Ponders described you are throwing away hundreds, possibly thousands, of pounds in tax relief each year by not filling in a tax return (25% of his total pension contributions for the year).

See an accountant.

bangersmashandbeans Tue 04-Dec-12 07:38:30

Mranchovy if I had access to an accountant without it costing me money would I really be asking mumsnet for financial advice?!

TheDoctrineOfSnatch Tue 04-Dec-12 07:57:04

Bangers an accountant would be likely to save you. Money!

Can you confirm: are the pension contributions you mention made by your DH or his employer?

MoreBeta Tue 04-Dec-12 08:13:09

The most important message is keep claiming your family allowance even if you or spouse are over earning threshold.

I read a thread a while ago on MN that if a non working SAHM doesnt keep claiming Child Benefit you will not be credited with your NI stamp.

Many women will stop claiming in the mistaken belief they cant claim Child Benefit now because their DH earns 'too much' and not realise they are damaging their future state pension. What they should do is keep claiming and then sort it out later via DHs tax return.

Can anyone confirm this?

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