Child benefit tax

[What0nEarthIsThis]

Hi,

I just read in the financial times that parents whose spouses earn >£60k a year have to file a tax return every year to pay back all their child benefit. The article says that that rule has been in place for about 10 years and if we did not do it then we have to still pay it back now, but we also have to pay the interest on the money.

It says if we give up having child benefit entirely then we won't get state pension credits for the time we are at home with kids.

I'm staggered. I had no idea about that.

I'm a SAHM and I have no income of my own. I don't file a tax return and don't know about tax rules. I never looked into them because I have no income to pay tax on.

I'm also properly cheesed off because life is so hard with the underfunding of the schools and the medical services, and now this comes along to add insult to injury.

I wondered if anybody else knew? And what do you think about it?

The article is called "Why Jeremy Hunt’s parent tax rate is proving controversial" but it's behind a paywall so I can't share it.

https://www.ft.com/content/08f678d7-1ac2-4f9d-86c9-3da040ca4107

Thanks!

He needs to declare it on a tax return in order for it to be claimed back in his tax code

We'll have to agree to disagree as I'm only showing what the eligibility criteria is and it doesn't say you have to live with the child to claim.

It happened a decade ago.
I can understand how it's overlooked though. I didn't know my arse from my elbow when my kids were little as I was so busy.
And it's still not fair that it penalises lone parents.

I am disgusted by it to be honest. It is a huge penalty on single parent families, it’s like the government actively wants us to stay in abusive relationships sometimes

Reduce your taxable pay by putting lots in your pension and/or claiming tax free childcare. Or working PT to take you below the limit. It's a very easy tax to avoid if you are on the ball.

Someone asked if they needed to fill in a self assessment firm if their taxable income is below the CB high earner lower limit, the answer is no. If you go on High Income Child Benefit Charge website you can fill in the info from your P60 and it will tell you if you need to do a self assessment form. You won't necessarily get a letter when you go over the limit, I didn't, although that may have been because DH had to pay some back the year before.

Op I don't think the grandparents can actually claim it. What you can do is transfer the NI contributions to the grandparents if they are under pension age.

I do think the OP mum is committing befit fraud by doing this as otherwise all grandparents of any child could claim it if the parents can't and just provide proof they had spent the money on the child. Which I don't think is actually possible.

https://www.moneysavingexpert.com/family/grandparents-childcare-credit/

How? How and why would anyone want you to stay in an abusive relationship?

"If either your or your partner’s ‘adjusted net income’ is over £50,000 a year, you may have to pay the High Income Child Benefit Charge."

There is nothing about couples here. It's about the highest earner.

https://www.gov.uk/child-benefit

The grandparents can claim it, but it will still have to be partially/fully repaid if you or your partner earn over £50K.

So does your partner earn over 50k? If he completes a tax return there is a section for it to be included in the calculation.

workplace pensions doesn't count but if you contribute to private pension contributions then you can deduct this amount. I had to ring HMRC and they confirmed it

I knew, and I was a SAHM for a number of years, and we paid them back so we can get the pension credits.

It was a MAJOR news story for quite a long time because of the inherent unfairness of it all.

I'm a sahm to a high earner so my mum makes the claim - she contributes to the dcs more than the amount of child benefit which means she can claim even though she lives next door. Not affected by DH's salary as it's a different address.

This is batshit. Even if there is a loophole, you must know it's an obscene thing to do. You and your DH earn enough for you to be a SAHM and you don't need the benefit, but your mum claims it anyway. You know this isn't what it's for. So what if your mum contributes to her grandchildren - that's not for the state to reimburse her and no doubt she can afford to as she's living next door to a high earner so isn't short of a bob. Clearly that rule is not there so that any high earners can outsource their benefit to someone who treats their grandkids. Jesus wept, the morals of some people. This loophole needs closing.

I'm really interested in the grandparent thing, it's not something tid need to take advantage of but I'm amazed that if it's the case I e never heard of it.

I keep up with consumer finance, listen to Martin Lewis etc and never seen it mentioned until today

Why isn't the loophole more widely known about?

Because it doesn’t work. It’s still repayable.

Women who care for young children or other relatives are giving society a lot of support as otherwise the cost to the state would be higher (I know not so much with childcare but it is becoming more as more childcare becomes subsidised. I know that's a whole other topic) also maybe they don't need to claim some other benefits if lower income. Like working tax credits.

How does this work? Someone not working or paying tax is using the NHS, roads, education for their children and all the things that tax pays for, whilst looking after their own house and their own children, which working parents do as well as work and pay into the system. There is a big difference if the child (or other person being cared for) is ill or disabled, but healthy school age children are not 'looked after' in anything like the same way. How does being in the house when the children are at school give society a lot of support?

I also don't understand the argument that it is 'unfair' for a family with two people working and paying tax/NI who pay for commuting, other work expenses and are probably paying childcare costs too to have a higher threshold for losing CB than another one who can afford for one parent to SAH and thus not contribute anything. The SAH family won't be paying childcare, commuting etc either. It seems to me perfectly fair that the working couple should get more CB than the SAH one.

I've never heard of a loophole for grandparents to claim child benefit, but they can claim the subsidised NI credits towards their own pension if they are below SPA and don't have enough years in their own right.

The grandparent loophole is widely known. Many people use it if both parents are working (and therefore their NI is covered) as a way for grandparents getting NI credits. I also happen to think this is ethical in cases where the grandparent has given up work to look after the grandchild.

The thing people are missing is that the higher earner still needs to pay it back via their tax return, regardless if who actually receives the payment of the benefit.

This is nonsense.

If the grandparent has child caring duties because the parents are working then the child benefit NI credits can be transferred.

https://www.countytimes.co.uk/news/23038239.martin-lewis-highlights-benefit-grandparents-can-thousands-pensions/

Edit: to insert ‘NI credits’

I thought the grandparent thing was more around taking the NI credit if doing the childcare and the child benefit claimer did not need it. Didn't realise they could claim in their own right. Surely loads of people would be doing it?

But @hellonnme isn't talking about the NI credit she's saying the grandparent gets the money and the higher earner doesn't pay it back because they live at different addresses

It may still be worth claiming it as its £60k after pension contributions, so you will probably still keep a portion of it. But I would put it into a savings account so it’s a not a chore to find it at the end of the year when time to repay it.

I have to do this as earn over £50k. It is an annoyance but fairly straightforward as most of the info you need will be on your P60. Important things to know.

1. Make sure you keep a record of any giftaid charity giving you do as you can add this into your tax return and it will help reduce your effective income.
2. If you can afford to, consider additional contributions into a work pension as this will reduce your effective income.
3. If you are repaying child benefit via your PAYE tax, make sure you do you tax return early as it can change your tax code.

If you are on over £60k then my understanding was that you are supposed to get no child benefit so claiming it and paying it back would only have a benefit if you can pop it in some form of high interest savings or similar.

Of course it is massively unfair as it penalises families with uneven income between partners. This is a key argument against reforming or scrapping it especially as the thresholds have been frozen so more and more people are getting hit with this now.

I recall that HMRC have lost a number of cases where people have successfully claimed that the government had not done enough to inform them of this liability when their income went up, but I suspect that defence is less likely to fly now.

A couple is on reasonable salaries of £40k each and split childcare responsibilities and run the house together etc. Get child benefit. If someone needs to split and earn more to cover childcare, so might need £60k as a single parent.. now no child benefit. That is not fair. People do stay in relationships they would rather leave because of this sort of thing. Single earner families are looked down upon by this government.

If your hypothetical couple split, the the parent who has the children can still have CD.

Single parents receive council tax reduction and can receive higher UC.

Is it fair on couple where both are working if single parents receive more beneficial treatment? Then everybody will be separating.