Child benefit changes - what do you think?

[KateMumsnet]

Next week, the Inland Revenue will write to 1.2m families about upcoming changes to child benefit eligibility. The changes mean that from next January, single-income families earning more than £50,000 per year will no longer be eligible for the full amount (currently worth £1,055 for the first child) - and those earning over £60K will no longer receive it at all.

The changes are controversial. Dual-income families who both earn just below the 50K cut-off - who have, in other words, a family-income of just under £100K per year - will continue to receive the full amount, leading to criticism that the changes penalise both stay-at-home mothers and single parents. Accountants are warning that new partners of divorced parents could also lose out. And the entire process is so complicated - with families forced to fill out complex self-assessment forms for the first time - that the Inland Revenue has reportedly postponed sending out the letters because they can't find a form of words that families will be able to understand.

What do you think? Will you be affected by the changes, and what will it mean for your family? Are stay-at-home mothers being unfairly targeted - or is staying at home a luxury which shouldn't be subsidised by the taxpayer? Should child benefit be universal - or should it be available only to families who are really struggling? Let us know what you think here on the thread, and don't forget to post your URLs if you blog on this subject - we'll be tweeting them over the next few days.

i don't think it will stop people taking promotions or pay rises - to do so would be very short sighted. ok with the first rise you may lose a little if it puts you only just above the threshold but the next payrise would see you in profit again. you don't take a payrise/promotion thinking it is the last bit of progress you're going to see in your career unless you're about to retire or something in which case cb is the least of your financial concerns.

the idea that there is no incentive to work is a nonsense - people seem to have crazy notions of how much benefits are and forget that year on year benefits depreciate in value as prices rocket and people make zero financial progress. you can't say well we're as bad off as someone on benefits because we're paying a crazily high mortgage so what's the point - that mortgage is an investment, you are making financial progress for the future that the person on benefits is not. you are also enhancing your earning potential year on year.

for people who've been long term on benefits it's not lack of incentive that gets them imo but fear and a lack of faith that they'll be able to cope with working or with making ends meet or whatever. it's a kind of institutionalisation that happens - you're poor but secure, the big stuff (rent, council tax) is taken care of behind the scenes and you cease to even think about it. you get used to living on a small amount and you get good at it. you can inhabit a very small world and range of people/activities/etc but be used to it and going beyond it is... sort of shell shockish. the benefits bashing of government and media doesn't help in the slightest, it makes people feel even more 'outside' and inadequate and... sort of primal in terms of feeling under attack and therefore a) digging your heels in and b) even more sure 'out there' is mean, horrible, un-copable, not for people like us etc. you won't starve them out with poverty - the more punitive and threatening you get the more they will burrow back away from taking part in society.

i guess the same might be true of being a sahm - maybe similar institutionalising factors and effects. all of this is a bit irrelevant if and when there are no jobs for people to go to anyway.

The discussion is wrong and Xenia making comments like the single mother might be able to push her earning capacity to £60 or £70k 'if she works hard' is just a dis-service to most hard working people. It's just not as simple as hard work always leading to increased income. I do accept that that might be your experience but for my particular work, its about the economy in general, whole sectors being in a position to offer pay increases etc. Everyone of course has to take responsibility for their own future but there has to be the opportunity. At the moment, irrespective of the level of effort people put in, it's just not there.

But that's all off point of the OP!

I wouldn't say no a promotion or a pay rise, but between 50k and 60k I will face a 78% marginal tax rate (40% paye, NI and 5 x CB lost in increments), ... so yes, for me it is a disincentive to increase my hours.

My mythical single mother is on £50k a year and has £216 a week after tax and her travel and one nursery place and is not tha tmuch better off than the benefits mother BUT she has the chance as swallowed says of bit by bit getting up from £50k. I did not suggest a single mother on £13k minimum wage could easily get up to £50k.

It's very unfair that a family who actually have a higher net income than their neighbours, will be allowed to keep their CB, whilst the other, who after tax, have less net income will lose it.

We will lose ours because even though both DH & I both work, he earns over the threshold. Another family we know, have a higher net income than we do because both parents earn below the threshold, but more than DH & I combined and will keep theirs. How is that logical or fair?

It should have been based on total household income.

Also, this discussion should have been had back in March when they announced the revised threshold in the budget and whilst there was time to lobby our MP's to vote totally against it. I wrote to my MP several times to express my views, but he said although he was voting against it, many more were voting for it. I think it's way too late to do anything about it as they passed the bill months ago [hangry]

The bottom line is that there were good reasons for it to be a universal benefit, those reasons till exist today and so they shouldn't be changing the rules.

If they want to hit those with a 'high' income, they should find something that impacts all 40% taxpayers equally.

but I'm still confused how this fits with dropping the highest rate of tax by 5%?
(Which benefits the highest earners)

personally i'd have gone for making changes to future claimants. i would give a family allowance rather than 'child' allowance and make it reasonably generous - say £35pw (first child is about £20 currently) but then that woud be it - it woudn't increase as you had more children - there'd be no per child factor. i would have done the same with ctc/wtc - make the first level more generous as a family entitlement but not increase after that if you have more children.

that gives an acknowledgement of the extra financial burdens on parents but makes clear that is all you'll get and you choose whether to have a large family based on that knowledge. i'd would make it a 'from now on' thing so existing children who are already receiving cb continued to do so.

still not till...

I saw on the news that around 82% of people agree with this. And although it doesn't affect me I did at first think well is it fair re high household incomes still getting it. But I now agree. I mean does somebody on £50,000 a year need more money from the state. I suggest they don't. In times of hardship. They should raise the tax threshold to £15,000 and take a lot of lower paid people and part time people out of tax altogether. That would be sensible.

I meant dual higher income households still under the limit for the benefit. (As on £95,000 or so)

i guess you have to think of it in scale - if they're seeing fit to cut the childcare element of tax credit for someone on 12k a year then of course, in that context, it is appropriate to say people on 50k can afford a loss too.

but when you take the bigger context of banks that got us into this mess still making multi million pound profits then no of course it's not ok.

I saw on the news that around 82% of people agree with this

Yes - I saw this. I can only assume that the chancellor's poll was a hands up round the cabinet table with the lib dems were in the loo!

I'm sure that many people who aren't having their income reduced by this measure are in favour - after all the government has worked hard a dividing the country for exactly that reason.

The majority of those unaffected are thinking, phew! that cut didn't affect me so I'll support it.

it's probably because 82% of people polled could only dream of having 50k per anum.

swallowed Aside from those in a 2 income family, who earn £49k each - they don't have to dream of earning £50k they earn £98k but keep their CB!

So its not quite that black and white is it? But it's always good to meet someone who has bought in to the Governments divide and conquer approach!

At the end of the day, to someone earning £60k with 2 kids this equates to a pay cut of 4.5% - everyone is going to feel that with the exception of the super rich (you know, those that got a 5% tax reduction at the last budget).

So just because you may earn less, doesn't mean everyone who earns more than you can afford to have their income cut.

Don't forget there are an awful lot of professions within the public sector - doctors, solicitors, accountants, scientists etc, all probably HR and all already suffering long pay freezes, hiked pension contributions and then for those with children, they get slapped with a child benefit cut. People live to their means and losing income impacts everyone irrespective of their payband.

I think they should be looking at getting this money from across the HR population not just from those people with kids. what about raising the tax rate to 41% - that would have a higher yield than the CB cuts and affect all HR people equally rather than a small number.

Swallowed out of interest what austerity cuts have you personally suffered from and how much of your existing income did you lose?

lots of assumptions about what i think and understand there. i was speculating on why such a high percentage may have agreed with this and summarising that is because so many people on this country are living on such low incomes.

not saying it's easy for people to lose money but am saying it's understandable that people who live on a fraction of that might find it hard to sympathise with people earning 2 or 3 times as much as them crying poverty. that's not divide and rule but common sense. i know families where both parents work and they bring in less than 30k between them, pay a mortgage, raise 2 young children etc. i would not blame them if they didn't feel massively moved by the plight of a household on double their income losing a couple of grand a year.

i'm not sure if you've read the thread - i was pretty up front about my financial situation and how it is changing soon due to starting work. you would also see if you bothered reading that i've said i don't agree with this cut and stated what i would have done instead.

so your launch at me is odd.

Let us not go on about the 5% reduction. The 50% rate brought very little in and meant less tax to feed the poor. Labour did not have a 50% rate, not until its very last year when it was on the way out so it did not matter what its effects were. Labour had a 40% upper tax rate. We now have 50% (and higher if you add in 2% NI and loss of allowances) coming down to 45% plus NI etc next year. The rich are by far bearing the highest of all tax increases at the moment and they were first to bear the brunt too. We are not all in it together - instead the rich are bearing the burdens. Some of us work 50 weeks a year 6 or 7 days a week to support benefits claimants and we keep doing it week in week out (or I do anyway) and yes now as ever the rich are losing out - I lose all my child benefit as a single mother. I shall cope. I can always work harder. I have even had periods when 5 - 7am on Saturday where waking hours when the twins were little. I am sure the benefits claimants I support are very grateful.

But a HR earner already has other advantages which you seem to have forgotten Xenia, its not a question of you always having to bail out other people because you pay so much tax. Just take the childcare voucher / salary sacrifice scheme for instance - a HR couple could be sending their child to a nursery costing £500 per month - they both use their £250 worth of vouchers (or thereabouts) to pay for it. They save the £200 they'd have paid in tax - so they're really getting £500 worth of nursery care for £300 (and obviously the nursery still gets its £500 - so who is paying that £200 difference, Xenia??)

In comparison, the basic rate taxpayers also use their £500 allowance to pay for the £500 nursery, they'd have paid £100 in tax, so its costing them £400.

So the HR tax payer pays 60% of their childcare costs, the BR tax payer pays 80%.

Had they earned the £500, they'd have paid £200 in tax. They both "save" the tax on the vouchers - at 40% - so it costs them £300 - the government pays the nursery - the full £500. a HR earner doesn't pay tax (at 40%) on their childcare costs for the £240

swallowed apologies, I had skim read parts and clearly not well enough!

Please accept my unreserved apologies.

i know families where both parents work and they bring in less than 30k between them, pay a mortgage, raise 2 young children etc. i would not blame them if they didn't feel massively moved by the plight of a household on double their income losing a couple of grand a year.

Yes this is so true. I am a single parent and on around 15 k. I am sorry but I do fail to see why someone on 50k is pleading poverty.

That said I do think the way in which the Government is going about it is wrong.

i know families where both parents work and they bring in less than 30k between them, pay a mortgage, raise 2 young children etc. i would not blame them if they didn't feel massively moved by the plight of a household on double their income losing a couple of grand a year.

Yes this is so true. I am a single parent and on around 15 k. I am sorry but I do fail to see why someone on 50k is pleading poverty.

That said I do think the way in which the Government is going about it is wrong.

I would love to be struggling on 50K!

A higher rate tax earner only gets £143 in child are vouchers tax free.

Also - I use childcare vouchers - it's still £243 that comes out of my salary! I don't know where you're getting this mythical £200 saving I don't get any childcare for free - it just means the taxman doesn't get as much of my salary.

It works out as a £300 per £1000 saving on tax.

You'd be hard pushed to get a mortgage on 30k joint income, unless you had a massive deposit/equity. Which isn't to say people don't, but rather to say that 50k is hardly untold riches.

All this is by the by though and playing straight into the government's hands.