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Implication of removal of child benefit for SAHM's with high earning DPs(42 Posts)
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.
Just me worrying over nothing then, or have I really spotted something no-one else has seen? (first time for everything!)
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.
No, I am worried about this too. Have been looking at paying voluntary NI contributions.
This has been highlighted in the past, but is worth a reminder
Here for example www.telegraph.co.uk/finance/personalfinance/pensions/9141092/Child-benefit-cuts-351000-middle-class-mothers-could-lose-some-of-their-state-pension.html
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.
HMRC link this implies you still claim and its clawed back via your DP.
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
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.
I will be interested to see exactly what the letter says.
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.
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.
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?
"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."
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!
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.
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.
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.
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).
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?
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.
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.
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.
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.
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.
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