Tax allowance

[NiceCuppaTe]

Hi all, first time posting so go easy!

Does anyone else find it frustrating how the tax system is stacked against families with higher single earners as opposed to dual earners?

For example, I'm currently on maternity leave but we can't use the married tax allowance since DH is in the top tax band, we therefore we also get no CB and he has no tax free personal allowance. However a household with two earners each making half as much would end up with more money after tax due to lower tax bands, personal allowance etc.

Does anyone else just feel like the system penalises single earner households (i.e. families) rather than DINK households when really it's families that should be getting the support?

No

My husband is on a high salary. I work from home and earn roughly £500 a month. I can't claim CB, but a working couple both earning under £50k would earn more than DH and get full CB. That does bother me, and when I phoned to change the provision a year ago the lady I spoke to said it was unfair to families too!

You should still claim the Child Benefit so that you maximise your National Insurance credits for your future State Pension entitlement (even though you will have to repay the CB in due course).

Why haven't you taken into account that a household with two earners potentially also has two lots of working costs? The personal allowance is 12.5k so if like the large majority of the population you're a normal rate taxpayer, it amounts to just over £200 a month. There are plenty of people whose working costs are that and more. When I've had a long commute I have sometimes had to pay more than that.

There are bottlenecks in the system, a bad thing, but they don't just apply to parents with kids.

You should still claim the Child Benefit so that you maximise your National Insurance credits for your future State Pension entitlement (even though you will have to repay the CB in due course)

You can claim it but elect for it not to be paid so you can skip having to go through the rigmarole of repaying it but still get your NI credits.

That aside, what's your proposal? That we ditch the really important progress of having independent taxation and go back to treating women's income as belonging to their husband?

We should maintain independent taxation, but married couples should have the option of being able to pool their tax allowances. Where a career demands things such as constant travel, unsociable hours, emergency shifts etc one career inevitably has to be prioritised for the sake of the family.

As a single parent reliant on one income I have little sympathy. I earn in the higher tax bracket have no CB, only one allowance etc. So two people earning half what I do would have more net income. It is what it is. It isn't stacked against you, anymore than it is me.

Dual income households have higher costs that you don't have like childcare and two lots of commuting costs.

Plus less time to do things that save money like own cleaning, shopping around, cooking from scratch etc.

The tax system is progressive in that people on lower incomes pay less tax as a proportion of their income than higher earners.

If your DH is on top rate tax, that means that you have a household income of at least £150k, which is probably in the top 1% of UK incomes, so do you really think that you should be getting 'support'?

Families who earn under 43k do get that support (marriage allowance). Families who earn under 60k do get support (child benefit). Families who earn less again will get tax credits/universal credit etc.

You're asking should there be more support for people like you who have a household income in excess of 125k and the answer is no.

Oh and I have all those other costs too: mortgage, childcare, commute, running the house as well as doing all those less time to do things as I have to do cleaning, maintenance etc. I am not woe is me, but is fact so you should stop comparing yourself to others, it won't make you any happier

Married couple each earning 49k. Single person earning 98k. Live in identical properties.

Living costs will be more for the married couple, but won’t be double. Married couple pay less tax that the single person. Irrespective of whether they have children, that does seem unfair if you consider ‘family money’ as a total. Our tax system isn’t, however, based on family money. It is based personal money/allowance. I got worked up about this myself, but I’m not sure what the alternative is.

What I do think is unfair/stupid is the child benefit difference and Inheritance tax/leaving your main residence difference. Particularly the inheritance one.

Child benefit should be based on total, but I don’t know how this would work. It is silly that in the situation above the married couple can get CB, but the single person can’t.

Married couple can leave their child a house work 1 million exempt of inheritance tax. If the single person was a single parent, they can only leave a property worth 500k exempt of Inheritance tax. That, I think, is very wrong.

married couples should have the option of being able to pool their tax allowances

Ok, why only married couples? What about unmarried single earner families? Doesn't that just give any potential (unfair?) advantage to married couples rather than couples without children, per the op?

What about a high earning single parent who loses CB and their personal allowance? Do we just give them their personal allowance and CB back to balance with a couple?

How does transferring allowances work? Joint election? Can one spouse make a unilateral election? Can a joint election be revoked unilaterally?

Is it all or nothing - can they specify part of an unused allowance or do they have to transfer the full amount or zero?

Do they have to decide before the start of a tax year? Can they later change their minds? Do they have to file tax returns to make the claim or to finalise the claim? Can they change their minds each year? Is a claim fixed once made? What happens if the higher earner loses their job partway through a year, can the claim be altered or revoked? Can it be prorated or will it be all or nothing?

What happens if they separate or divorce during a tax year? What happens to the claim? Can they still claim while separated but not divorced? Can they claim for part of the year or do they lose the claim for the whole year?

What about savings and dividends allowances? Should we make them transferable between couples too? Capital gains tax annual exemptions?

What about if one person is not entitled to a personal allowance because parliament decided individuals in their circumstances should not benefit from one - can their spouse usurp that by transferring theirs? Or will there be limits and exclusions?

If there are restrictions, how do we maintain independent taxation, bearing in mind HMRC can't disclose one spouse's tax affairs to the other? What happens if a lower earner transfers their personal allowance to a higher earner who should not have been eligible for it because they didn't know how high their income was, will there be penalties?

What if one or both individuals are not UK domiciled for tax?

Do we also pool the tax rate bands between spouses? Can they juggle those about too? So if you've not used all your basic rate band, can you extend your higher earning spouse's basic rate threshold?

What about reliefs for gift aid donations or pension contributions, should they be able to transfer the benefits of those? If your spouse runs a business and makes a loss, should they be able to transfer that to you to offset your income?

Where are we drawing the lines? And what lines even are we trying to draw when we talk about pooling allowances?

And where are all the staff at HMRC to deal with something this complicated and advise all the confused people and deal with all the mistakes caused by that confusion? The high income child benefit charge has been enough of a nightmare.

The child benefit rule change is completely batshit. I'm not sure it's even saved much money either, given the costs of administration.

The length of Logistrias post illustrates how complicated it would all be.

Also, they do try to combine household income for tax credits purposes and that always seems to be a mess too.

Combining incomes to work on family income instead of individuals for tax purposes would lead to similar issues as the tax credit system where there are nearly always adjustments required and no-one knows where they are if they have paid the right amount of tax.

Isn't it the nature of life though that as soon as you start comparing your circumstances to any other person's you're going to find aspects of "unfairness", whether in your favour or theirs?

We can't legislate that away. It's not possible.

Agree that the child benefit rule for high earners was poorly implemented.

Perhaps they should have abolished CB totally and then included it within the tax credit/universal credit system for lower earners as they're going through the administration process anyway.

Having the ability to be a one parent household is a luxury. If you require extra money, then a few hours of work each month would make up the child benefit amount. Of course a couple who both earn, collectively, up to the top tax bracket might prefer one to stay at home- but they won’t be able to afford it.
Also remember those with 2 parents at work will likely have far higher childcare doses which will far exceed the amount they get in child benefit.
So no, I don’t think it is skewed at all.

Oh, you poor poor soul, being on the top tax bracket.

I agree. It should be based on household income not one earner.

Is the job one where he could perhaps go self employed and contract? I know some people where they have been able to do this and then split the income through a limited company.

Does anyone else just feel like the system penalises single earner households (i.e. families) rather than DINK households when really it's families that should be getting the support?

No I don’t think households where one person earns over £150,000 are the people in society who “should be getting the support”.

DINK households wouldn’t be claiming CB, and probably wouldn’t be using the married tax allowance since they’d both be using their personal allowance so not sure what your point is there.

There are lots of “families” (I assume you’re using this to mean people with children) that have two incomes and are also paying childcare costs.

We fought long and hard for separate tax ation of husband and wife and I am so glad it is in place now.
So I do support the current regime although i do recommend women go back to full time work very quickly as I did after babies as that is often protective of families (if husband loses job) and shows children women work rather than just serve men and also has the added bonus of keeping more women in the work palce and able to do well. (I ended up earning 10x my husband and that is pretty nice too!)

Anything that acts as a disincentive to women staying at home is a great thing in my book.

I guess when its two people earning you have 2 lots of working costs (2 lots of travel costs, childcare costs etc) which would cost more than the benefit you get from tax saving.

Thanks for the responses, I agree that taxation should remain separate to some extent (encourage being independent earners etc.) However I think that things like the marriage allowance should be extended to be more widely applicable, currently it can only be used if the primary earner only pays basic rate tax.

I know some people are mentioning DH's income, however I don't think that's necessarily so relevant. The CB issue would still apply if DH earned 70k vs two earners at 35K each but people would probably sympathise more in that situation.

If your DH has no personal allowance then he earns over 125k. So no I don't think you are hard done by.