feeling that tax credits are totally biased towards working mums?

[Dragonhart]

I am a SAHM and I get the min working tax credit as my DH earns just over the min for getting more help.

I was talking to my friend yesterday who works 4 days a week as a teacher (their combined salaries are just below the top of the band of getting any money) and I was saying what I got now we have two children. I get just over £40 plus about £40 baby element. When dd is 1 and I have two under 3 I will get £40.

She told me that she gets about £160 a months towards childcare in vouchers on her and her husbands paypacket (not sure if this is classed as tax credit?) and £75 permonth for her only ds in tax credits.

I am not making a coment about whether or not people choose to work as I stongly believe that everyone should have a choice to do what is right for them.

I just think that I should be supported in the same way as working mums. Surely I am my childrens 'childcare'?

Ah, so it was the childcare element that the woman was telling me about.

Yes, but "company" is the relevant word, may be? I couldn't see anything that said if you are a sole trader, don't have a company, aren't employed you can pay yourself the vouchers even if you earn millions. But I might be wrong. £55 a week not taxed at 40% is presumably the result £2860 of income x 40% is £1,144 a year in cash terms. I don't see how you can claim it if you're not employed by your own company or by you. I can envisage spending more than £1144 of time on finding out though....

xenia, i think you're right you can't do it if you're a sole trader. but that has nothing to do with income levels.

there is more than one way of being self-employed.

-sole trader
-partnership
-limited company

if you are self employed via your own limited company then you may pay yourself child credit vouchers, if you are a sole trader my understanding is that you can't.

bk, exactly. The system for this is if say Lord Browne as a number BP employee with a package worth £15m had a child he could get the vouchers. Whereas a house cleaner who is self employed and doesn't have a company could not.

Also to set up a company - costs etc annual accounts the expenses of that are probably not worth even to higher rate tax payers the £1000 a year or whatever the benefit is. If instead it meant you could deduct £30k cost of a nanny then it might be worth bothering with.

Anyway it looks like I'm well clear of all that and children coming up to an age when we don't need to pay for childcare anyway after 22 years of doing it.

having just set one up, i agree that to do it just to enable childcare vouchers would make no sense. one would need to ensure that other benefits, e.g. tax breaks were available.

Xenia, no idea what a sole trader is, sorry, assumed you had your own company. Personally if I was earning millions I wouldn't bother with anything that was a hassle, like all these things are. Remember it is £1114 or whatever it is saved in tax x 2 if the father can get it too. For most people a couple of grand saved a year in tax is worth the admin - runs itself once set up. Sorry you are excluded, I guess you are a fairly specific/unusual case - maybe you gate other tax break type things to soften the blow (mind you all that offsetting against tax probably requires a company too)

What is a sole trader?

If you want to sell goods or offer services in the UK you can do it in a few different ways. Take the example of a piano teacher, hairdresser or cleaner. She could go to the Government Companies House and register a limited company - "Mrs Smith Hair Ltd". She buys that company. There are then in law two "people" and they are separate. There is Mrs Smith herself and the company and they both have to pay tax on their income if they have any. So if she does hairdressing and she makes a mess of it but it was her company doing it the customers take the company to court. That's a good reason sometimes alone to work through a company - it's called "limited liability".

She might thenwork for her company. If the company made a profit of £20,000 but paid it all to her then the company payus no tax and she pays tax on that slary of £20,000. As she owns the shares in it she might instead be paid something called "dividends" just like you might get if you owned shares in BT.

If instead she worked without using a company like I do then there's only one "person" to tax- her so the money goes to her and she's taxed and she is then called "self employed" and a "sole trader" - trading on her own.

Sometimes people don't use a company but two friends get together and say do the hairdressing together. That might be a partnership.

What's the advantage of being a sole trader instead of a company? I work in IT and have only come across contractors who do it through companies - interesting.

How can you pay yourself dividends unless it is a plc?

BM and Xenia - yes DH has a company. I am also employed by the company - which is another advantage, in that I can get a small salary and dividends from the company.

Depends on your income. If you keep the income in the compnay you can't spend it and I need 100% of it out of any company I might want. So then I draw it out and it would be taxed in my hands at 41% most of it because I earn quite a lot. So if it was dividend income most of it would be at 40% (tax) and if earned income 41% (tax and NI) - you pay 1% NI over an upper earnings limit.

There used to be a lower earnings limit companies paid tax on at quite low rates - brown encouraged everyone into that and then had a big laugh and abolished it a few years later - ho ho ho you feel he laughs.... then we've had all those IT contractors under the IR35 tax rules who are got caught a bit unless they group together with 24 other contractors or whatever. They tend just to have one client so are now taxed a bit like employees. Then we had some husbands and wifes under that other recent case who suddenly because the husband did all the work and wife did nothing the tax office change 25 years of practice to tax it as if it were all the husband's money. It's all been great fun all these cases etc on tax.

But for me basically if I worked through a company I would be worse off unless I could afford to keep a lot of the money in the company which I can't.

Xenia, yes it can be hard to juggle looking after a 2 year old and still get up at at the crack of dawn to walk 2 miles to work.

I am 'too proud' to not work though, I guess. I am hoping when ds goes to school I can broaden my horizons! I do enjoy my job, just hate the hours. I am lucky that my employer lets me choose the hours.

I'mnot sure what makes people happy but exercise (walking a mile to work) and fresh air are the things recommended for people with depression to make them happy....as well as the structure of some work too so perhaps work even if it's not that profitable for some people does keep them happy.

Oh, yes, exercise and fresh air really helped me feel 'happy' with severe PND.

And working, yes, that did loads to improve my condition.

NOT.

but Xenia you can also have a structure without work

i also agree with xpat, you may well think yes its going to help but in those situations your get up and go got up and went and you are left feeling miserable all the time which means a lot of things that should help dont

expat, I was serious. My father and brother are psychatrists and they have devoted much of their lives to helping people with depression obviously mostly with good combinations of psychiatric drugs and therapy but without doubt for many people increasing their beta endorphins or whatever they are through exercise and fresh air can be an important part of helping them get well. I stand by that entirely.

xenia excercise can help but as you have said drugs etc have their place too, you have to get to a certain point before you can even contemplate excercise /work

Xenia's absolutely right on the fresh air and exercise hypothesis - ie them being good for depression. And on structure - though I don't believe that structure has to come from the outside, I believe that a better structure is one that one creates for oneself.

Yes, Anna but a lot of people retire thinking they will have a marvellous life but when they don't have that 7.30am train to catch, suit to put on and day mapped out it's much harder to be happier for many. Same when you leave prison or the army.

On depression, that's very true. People who criticise the drugs are wrong. They save lives. But I know my brother finds they usually work best with therapy. My father always used to be trying to think of things people could take up on the open air as ideas to get them interested in things again.

Some people work even when they don't have to financially. I know of men in their nineties toddling into the company they founded every day, driving the staff mad with their bumbling. Many people are fulfilled by work in a profound way.

i am so glad working in an office is being compared to being locked up or in the army. i would add "nut house" to the list, because that is how it felt to me, being cooped up with my colleagues 12 - 15 hours a day.

NKF - it fulfills some people until the day they die to work in a structured org., but to some of us it is the antithesis of LIFE.

i agree about the old man still going into his own company though - my dad was a businessman, died in his early 60's sadly, but i know if he had lived into his 90's he would have worked and worked because he loved his business.