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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.

CarolynKnappShappey Thu 08-Nov-12 15:52:56

NB that the magic letter states positively that NI status will not be affected by waiving CHB though I'm not sure how it works. I'm also not sure how easy it would be to reclaim if eg DP walks out or loses job, so in these uncertain times you might feel safer keeping up your claim and paying it back in tax just in case.

mamhaf Thu 08-Nov-12 15:21:13

And I should have set, if that does alter your position, then get your dp to claim instead of you.

mamhaf Thu 08-Nov-12 15:19:49

Gettingdark - depending on your circumstances, you may not lose all your CB.

From what I can see, it's on net income, so pension or salary sacrifice could put you in the 50-60k bracket.

My dh has always claimed ours because I guessed something like this might happen.

I have just whacked up my pension contributions and am thinking about buying am extra week's leave, meaning we would keep most of the CB.

MrAnchovy Mon 05-Nov-12 22:07:55

Looks like I was right about Guy Fawkes, although it seems that HMRC have abandoned the idea of tax code amendment altogther. Better never than late then. Or something hmm

MrAnchovy Fri 02-Nov-12 16:51:48

@gettingdarkoutside from what you have said I can't see any point in your partner claiming instead of you. As long as he pays Class 2 National Insurance, as he is required to do if his self employed earnings are over £5,595 a year, he is getting full credit for the Basic State Pension. If either of you earn over £50k in any tax year, that person will start to have CB clawed back as long as one of you is receiving CB and you are living together.

I'd suggest you get an accountant though - an introductory half hour chat is likely to reveal a number of things that could be done to improve your tax position.

gettingdarkoutside Thu 01-Nov-12 19:37:47

I think scaevola has answered my question... I should stop claiming, and my partner - who is not a higher rate taxpaper - should start claiming instead. I agree with scaevola really but want to get the best for my children and plan for the more difficult times ahead.

scaevola Thu 01-Nov-12 19:29:06

"Any benefit received from the state ... is judged on a household basis"

That is however not what they are doing here. If it were on a household basis, then the situation where household X on £90k keeps CB in its entirety whilst household Y on £62k loses it entirely would not arise.

What is happening here is not a joint benefit. It is additional taxation on individual A based on individual B's sources of income.

I think it is wrong that individual taxation is being undermined with no proper consideration. Turning it genuinely into a joint means tested benefit would not alter the basis of personal taxation as this does. And it would be fairer.

gettingdarkoutside Thu 01-Nov-12 19:12:09

by the way, we aren't married if that makes a difference

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?

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.

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

Poor old HMRC grin

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.

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

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


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.

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 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 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).

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.

ilovemydogandMrObama Fri 19-Oct-12 13:50:11

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

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.

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.

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.

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.

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.

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.

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.

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