To think ‘household income’ should be a tax option?

[MeteorGarden]

(Disclaimer- I’m actually not a parent but grew up in a low income family where this would have made a world of difference)

It’s discrimination at its most socially blatant. HMRC may as well be dipping their hands straight into the pockets of family units and taking hundreds of pounds every month.

**Imagine: Two identical families have an annual income of £24,000
Family A- Has one person working full time whilst the other other provides childcare to 3 small children.
Family B - Both parents work part time earning £12,000 each whilst tag teaming childcare.

At the end of the month A take home £1600 whilst B get £1900. For the EXACT same hours and EXACT same salary!

How much difference would £300 per month make to a struggling family? What does it matter to HMRC whether one person earns or both? If you’re cohabiting/ married and share children you’re functioning as a family unit which shouldn’t be discouraged or disregarded by the government.

Why are HMRC happy enough to count ‘household’ income if it means they can refuse a benefit claim but refuse to offset that by offering a tax break?

**Imagine: Two identical families have an annual income of £90,000

Same set up as above.

A bring home £5000 per month whilst B bring home £5600 per month. To add insult to injury family B also get child benefit 😂🙈 - I bet they need it, surely it’s hard to survive in £5600 a month!

My point is that regardless of your income level, family units who split work unevenly (for whatever multitude of reasons families face) are being pick pocketed by the government.

(Disclaimer - I’m not suggesting that ‘household taxation’ should be forced upon everyone, just those functioning financially as a family unit)

Of course it should. In Australian, my husband and I filed taxes as 'household income'; thresholds/allowances could be split between us, and benefits were based on a capped 'household income'. We also weren't eligible for some benefits, such as childcare, when I was a SAHP, so it balanced out.

Simply not true. If I am a low-paid worker, I will likely pay no tax and earn less than the gov't subsidised nursery assistant looking after my child - who likely also earns so little she (yes it will likely be a she) pays no tax.
It is easy to do the numbers. If the nursery assistant does not pay any tax, then the surplus is passed to the nursery profits, and corporation tax is paid on them.

Subsidies exist now precisely because so few families can afford childcare even with subsidies.
However, when I wrote about SAHP costing the government more, I meant that they are less likely to become net contributors after the relationship breakdown. I am pretty sure everyone has seen situations where a (previously) highly qualified woman is able to choose only from min wage jobs after spending 15+ years at home.

The only thing I agree with is the unfairness of Child Benefit.

I struggle to see how a system that allows a household with combined income of £100k (2 earners with £50k each) to claim the benefit yet another household with joint income of say £65k (1person £55k 1 person £10k) would have to repay it all through tax or cease their claim.

Nope. Can't get my head round that one

Enjoli is right. These threads are always full of people reacting as if a system of optional family taxation is crazy talk when in fact it’s the norm in the G20. The U.K. is unique in giving a single person exactly the same tax allowance as a parent of five children with a non-working spouse.

Individual benefit claims would be very tricky, (and hugely unpopular once the Daily Mail tracked down just one woman living with a banker spending her benefit money at The Ivy and paying her Housing Benefit to her boyfriend as rent). Would a SAHP married to a wealthy spouse claim on the basis that their children were all theirs? All the spouse’s? Half each?

The tax system is largely based on the outdated notion of a husband who works and wife who is a SAHP. Not the only thing stuck in the 1960s, but no surprise.

Correction: it’s not exactly the same if you have a non-working spouse because of the married couple’s transferable tax allowance, but it’s bloody close.

Let's take a scenario of one parent earning £100K and another £10K, four children. Who is then claiming welfare for the children? (in excess of £20K for one parent and £0 for the other parent?)

Well I’d suggest that benefits for children take into account both resident parents income. I think all other benefits payable at individual level is fine. In reality SAHP wouldn’t actually claim lots of them because they wouldn’t want to jump through the getting a job hoops.

Let's take a scenario of one parent earning £100K and another £10K, four children. Who is then claiming welfare for the children? (in excess of £20K for one parent and £0 for the other parent?)

Not sure. I think the best approach might be to have universal rather than means-tested benefits for children, paid to parents in proportion to the extent they have residency. So 50:50 in this case. Obviously a lot of extra tax will be needed to fund that, so in this case the 100K taxpayer would probably lose more than the household gains in benefits in extra tax paid.

Well I’d suggest that benefits for children take into account both resident parents income.
Would make sense to do the same for the housing benefit, family / child element of the tax credits and the council tax reduction.
Errrmm… what is left? Unemployment / jobseekers?

As I recall,one of the reasons women fought for individual taxation was because tax returns ( and if you tax household income you would have to fill in a return every year) were always sent to Mr whatever. So men had all the financial control.

The tax system is largely based on the outdated notion of a husband who works and wife who is a SAHP. Not the only thing stuck in the 1960s, but no surprise.

No, it isn't.

The current UK tax system incentivises 2 earner households, who benefit from 2 personal allowances and 2 basic rate tax bands, are more likely to qualify for child benefit and can take advantage of childcare subsidies.

A family living your "outdated notion" model gets 1 personal allowance and 1 basic rate tax band, is less likely to receive child benefit, is less likely to use childcare subsidies.

I wish we could file jointly it would make a massive difference to our family but the government isn’t going to do it because it would lose revenue, what’s in it for them?

Those who know other systems may have know, but I wonder how it would impact PAYE employees. I mean, many people just have such taxes automatically deducted and the taxes are taken care of by their employers, they don't really have to file their taxes as happens in other countries where even when taxes are automatically deducted with no other incomes, you're still required to file on top of that. I'm sure there are better systems (certainly not the US one which is notoriously complicated and I know women in my family who had many issues with household filing) but I'd need more than oversimplified examples.

I agree the whole child benefit means testing is a badly thought out idea; however, benefits that are calculated on 'households' define that differently depending on the benefit. While there can be differences under House Sharing situations (and I don't know enough about Universal Credits to know), typically Housing Benefit and Council Tax Support involves all adults in a house whereas Tax Credits only count parents and partners regardless of other adults who might be in a house "functioning financially as a family unit". We might want a consistent definition of household before we tax on it.

I would have thought that the simplest solution where both are Paye only would be to tax as individuals over paye then have a very simple way of entering both p60s at the end of the year...

I'm sure there is a simple way it could be done though with government's recent schemes and apparent desire to copy the US, I would be concerned they'd make something else that was overcomplicated.

Maybe a better option would be a special tax code for people supporting dependent adults (this could be anyone earning less than NLW that would enable them to take on their whole tax allowance - not just the paltry part currently allowed, and open to people on any tax band) this would incentivise supporting e.g. sick and elderly relatives etc as well as household based childcare.

Here, in Spain, if you work for or receive a pension from a Spanish employer you get automatically taxed at the rate for an inividual. If you then want to be taxed as a household you have to fill in a joint tax return at the end of every tax year and you get either a refund or a bill.

If you are self employed or receive your income from outside of Spain you have to fill in a return every year.

In a country where 42% of marriages end in divorce, and a higher % of cohabiting relationships, why on earth should the government incentivise setups where one person is likely to be out of the workforce for longer periods?

Not only would we all lose out on the tax income on the short term, we'd be paying out more in benefits in the long term when previously stay at home partners are struggling to re-enter the workforce or have to do it at much lower salaries - as well as to counterbalance the lower NI contributions and pension savings of non working partners. Given the divorce rates, what seems like a punishment when all is going well (for example, I personally can't afford to be a SAHM, though would love to, and absolutely would be if we won the lottery), are actually a blessing to the individual in question if things go pear shaped.

@Stuckforthefourthtime uh, surely on a whole economy level the reason any given woman whose been out of the workforce can’t get a better job and is forced to accept a crappier one is because there are other people competing with her for that position, if there are more “good” (strong recent work history/experience) candidates the competition will simply be fiercer. The same number of people will still end up with the low paid jobs. Might not be the same people but there aren’t going to suddenly be more high paying jobs going around because less people are SAHMs.

@DieAntword but we aren't a sealed economy (even in the most disastrous Brexit scenario, at least at this point), so there aren't a fixed number of skilled jobs, or for that matter a fixed amount of income. If we are a more skilled country then we can do as we currently do and export services, for example - this brings the whole economy up, and increases the number of skilled jobs.
On a short term local basis this is as you say not true (for example, if you are looking for a marketing role near Chichester, new roles don't miraculously appear just because you are v experienced instead of a SAHM re-entering after years out) - but that's the point, the government needs to look at a wider population level over a longer time period. A more skilled economy = more jobs and higher earnings = higher tax income and lower benefit payout = less of a deficit and/or chance to actually invest in schools, the NHS, maybe even let people younger than boomers retire before 75 etc etc.
Doesn't mean that people shouldn't take the time out if it works for their family, but does to me explain why it's reasonable not to incentivise it.

What I find convenient for the government is, on one hand they tax married couples separately, not permitting household income to be taken into consideration together, and yet on the other hand, they’ll combine a high earner to prevent women receiving any benefits.

The UK system is indeed unfair because tax is individual whereas benefits are household based.
And yes, France has household based taxation, but most French women still go back to work when the children a 3-6 months old. SAHM are less usual than here. So not sure household tax discourages women going back to work...

Urubu, if your husband earns more than you and your taxation is affected by his income, then the French family quotient system means you will be taxed more than you would if you were taxed as an individual. This is a banal fact, not something that's open to debate.

Whether this is enough to convince women to stay at home or not depends on many many factors, especially cost and availability of childcare, but also cultural attitudes etc. I honestly don't know too much about France, their childcare, or female participation to the workforce; if you do, it would be interesting to elaborate.

What I do know is that childcare is very expensive in England, so applying the French quotient system compulsorily here risks creating many more SAHMs. Being able to choose between individual and family taxation would be a different story, clearly.

If people could choose single or joint taxation, whichever is more advantageous to their family, either the reduction in tax take would have to be made up elsewhere, or services/benefits etc would have to be cut to pay for it, so people might not necessarily be any better off.

I mentioned that family 2 tag team their childcare. Both working part time hours, equivalent to one full time job so one of them is with the kids when the other isn’t.

Well then IMO they deserve the extra cash for choosing a MUCH harder option than one parent caring and one parent working.