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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.

Ferrybridge Mon 24-Sep-12 21:12:37

Just me worrying over nothing then, or have I really spotted something no-one else has seen? (first time for everything!)

MisForMumNotMaid Mon 24-Sep-12 21:14:54

Wasn't the plan that the SAHP carrys on claiming and the higher rate earner loses it again through their tax code based on a tax return declaration. Thus getting around the pension credit issue.

suburban Mon 24-Sep-12 21:16:01

No, I am worried about this too. Have been looking at paying voluntary NI contributions.

AnnoyingOrange Mon 24-Sep-12 21:19:41
riksti Mon 24-Sep-12 21:21:07

There was a mention of a tick box on the child benefit 'unclaim' form that would say something along the lines of 'I want to unclaim the child benefit but I will still be entitled to state pension due to looking after children'. Not really sure whether that's still going to happen. I might know more tomorrow as I've got a course coming up re: the changes in the finance act. So can update tomorrow if nobody more knowledgeable comes along.

MisForMumNotMaid Mon 24-Sep-12 21:23:58

HMRC link this implies you still claim and its clawed back via your DP.

riksti Mon 24-Sep-12 21:37:58

www.hmrc.gov.uk/budget2012/cb-income-tax.htm#a8 the budget notes that say you will still retain the state pension entitlement even when you stop claiming the actual cash. As mentioned before - I'm not entirely sure that's still valid

Ferrybridge Mon 24-Sep-12 21:51:28

Yes, it will be clawed back through a DP's tax return where it's still claimed, but according to Radio 4 this lunch time, letters are going out this week asking people who are no longer eligible to stop claiming.

If those letters don't make the full implications clear, people are going to lose their pension rights.

MrsCampbellBlack Mon 24-Sep-12 21:53:58

I will be interested to see exactly what the letter says.

cutegorilla Mon 24-Sep-12 21:55:13

I thought that as soon as it was announced. It will be interesting to see if there is a way of keeping that entitlement without claiming CB.

BartletForTeamGB Mon 24-Sep-12 21:58:29

You still need to submit CB forms for any future children, even if you are not going to claim. For every week that you could have claimed even if you didn't, there will be the appropriate NI contribution made on the claimant's behalf.

weegiemum Mon 24-Sep-12 21:59:26

I've been thinking about that too. Until it's laid out in black and White I will keep claiming it until my Dd2 is 12, because I've taken time off from working to look after 3 dc and currently have an unpaid position coordinating for a charity that we can afford because my dh is a GP. Some thanks, eh, Dave, for being part of the Big Society?

BartletForTeamGB Mon 24-Sep-12 21:59:37

"Q8: Can I stop claiming Child Benefit so that I or my partner do not have to pay the tax charge?

"A8: If you think it is the right decision for you, you will be able to choose not to receive your Child Benefit payments which would mean that you/your partner would not be liable to the new income tax charge. But you should continue to complete claims for any new children even though you will not receive any Child Benefit payments for them. This is because for each week that you are entitled to Child Benefit you could qualify for National Insurance credits which can help to protect your future entitlement to State Pension. You can get credits if you are entitled to Child Benefit for children under the age of 12. This continues until your youngest child reaches the age of 12."

From www.hmrc.gov.uk/budget2012/cb-income-tax.htm

HalfaShandy Mon 24-Sep-12 22:08:01

Its probably all part of the plan - they probably hope in the long term sahms pensions will be screwed - why should they care??

Call me cynical but after the absolute debarcle of Tax Credits - this system makes me nervous (well it would if I came from a "higher earning family"). So you still claim in order to get NI stamp but then they claw it back through husbands wages! I would like to see them manage this without a fiasco! Its a mess and disaster likely to follow the same fate as the tax credits! Complicated, difficult and a cock up!

MrAnchovy Tue 25-Sep-12 10:23:50

There's quite a lot of old/incorrect/scaremongering information about this.

I cannot see why it would be in anyone's interest to stop claiming CB instead of having it clawed back through their or their partner's tax return. What happens if they separate, or are made redundant? AFAIK Child benefit cannot be backdated so if you are made redundant half way through the year so that you don't have earnings over the threshold, you would lose the CB you should be entitled to for the first six months. And apart from anything else, you get to hang on to the cash for up to 21 months!

No, the system as proposd is actually quite a good way to achieve the intended result: keep claiming CB and fill in the appropriate section of your tax return correctly. Your NI record will be unaffected and any changes in circumstances will take care of themselves.

There is one potential spanner in the works - there are some people who pay higher rate tax through PAYE that do not compete a tax return. If HMRC's letter suggests that these people might be better off disclaiming CB rather than ask to compete a tax return, then you can expect a big outcry from the charitable and professional advice sector (rather than a few uninformed journalists who have been behind the scaremongering articles to date).

But if you think that this could be a mess, you may be interested to know that the charitable and professional advice sector is already SCREAMING at HMRC and DWP about Real Time Information which is a huge change to PAYE reporting due to commence in April 2013. I have not yet met anyone who understands the finer details of this that believes that it will work.

MrAnchovy Tue 25-Sep-12 10:42:11

Oops, that last paragraph isn't quite what I meant. The reporting of RTI by employers should be mainly OK in itself (with a few exceptions e.g. casual workers paid on site in e.g. the catering, construction and agriculture industries), the problem is that the information it will provide for calculating Universal Credit payments (which is the whole reason it is being brought in) will in many cases not be usable for that purpose and will create a system that can be manipulated perfectly legally to increase UC payments.

riksti Tue 25-Sep-12 18:59:06

MrAnchovy, I disagree that charging for child benefit through the tax return of a person who is not claiming it and may not even have any children is a good way of achieving social equality. We have separate taxation which is now being undermined on some fairly arbitrary grounds.

MrAnchovy Tue 25-Sep-12 19:16:56

Did I say that the aim was achieving social equality? As far as I understand it, the aim was to stop higher earners from receiving a state benefit, and on balance I think what has been put in place achieves that more equitably than the alternatives that were contemplated at the time. How would you have done it? (I wouldn't have done it at all is not a valid answer: nor would I, but this is what was chosen to be done).

riksti Tue 25-Sep-12 19:29:34

Social equality may not be the right phrase but their aim is really to match the money with the people who need it so why not use the same delivery system as the rest of the benefits meant to achieve the same aim - the brand spanking new Universal Credit. They're supposed to have all the information to distribute the right amount of benefits through that, right? Note: like you I have my doubts about whether the combination of RTI and UC actually works but as it's supposed to do exactly the same thing the child benefit income tax charge clumsily is trying to achieve why not join the two initiatives?

LonelyCloud Tue 25-Sep-12 19:32:07

I'm going to continue claiming CB for DS, and fill in CB forms for any future children.

DH wasn't happy when I told him my CB would be deducted from his salary, but he backed down when I told him about needing to claim CB to protect my state pension.

I do think that this could lead to a lot of SAHMs with higher earning partners losing their entitlement to a state pension. Maybe I'm being cynical, but I suspect that the government would be quite happy to save on state pension payouts through SAHM's not claiming CB. IMO the link between CB and a state pension hasn't been publicised widely enough. I know it mentions it in the HRMC notes, but the information doesn't exactly leap out at you.

Northernlurkerisbackatwork Tue 25-Sep-12 19:35:32

We plan to continue to claim and the the government can claw it back from dh. Buggered if I'm going to make it easy for the government to remove this benefit.

riksti Tue 25-Sep-12 19:35:50

LonelyCloud - I'm not sure it does. We haven't seen the letters yet but HMRC notes after the budget announcement (linked above) imply that there's going to be a separation between getting the cash amount of child benefit and registering the birth of your child so your state pension entitlement is protected.

LonelyCloud Tue 25-Sep-12 19:46:59

riksti - I'm a bit skeptical about how it's going to work. The HRMC notes suggest that you'll still have to fill in CB claims - which is already separate from registering a birth - to protect pension entitlement.

If you do still have to fill in the CB forms, SAHMs with a higher earning partner who are unaware of the link between CB & a state pension may simply chuck the form away without reading the small print.

But I daresay we'll learn more about the finer detail in due course. As you say, we haven't seen the letters yet.

I have no major problem with losing the CB money BTW - we're lucky enough to be able to manage without it if we had to - but I am very concerned about the state pension entitlement. We're almost certainly going to need that.

MrsCampbellBlack Wed 26-Sep-12 14:16:59

There going to cover this on moneybox or r4 today at 3pm I think. They were discussing on you and yours today and apparently the letters won't be until oct/nov.

They were saying that if you're on the cusp so earn just over £50k its worth putting money into pensions/childcare vouchers etc to avoid losing your child benefit.

They also recommended you don't surrender the benefit but instead wait and pay if via the tax bill of the higher earning person.

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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