Idiots guide to child benefit changes please!

[bangersmashandbeans]

My husband earns just over 50k but with bonuses etc it is over 60k. Can someone please explain what we do about child benefit when it changes in January? It is calculated on 'adjusted net income' - what does this mean?! Is it the figure after pension contributions but before income tax and other taxable deductions? Have looked on various websites but can't make sense of it. Thanks!

"how much money do the government really think they are going to save?? "

HMRC have been trying to encourage people to go self-assessment for a long time because it's cheaper to administer. If this means many more taxpayers start submitting their own returns, it'll be a winner. The first year there will be extra costs that don't apply subsequently. So far I've only had one letter and that can't cost much.

Maybe I'm missing something somewhere but how much money do the government really think they are going to save?? The amount of extra work this has created is unbelievable.

Surely much money money would be generated by changing rules and ensuring that companies pay the tax that they should

NO

It's that kind of thinking that got us into the Child Benefit mess in the first place.

Consider this:

The "old" system of child benefit was simple to undersand and cheap to administer. It was a little bit unfair, because some people earning really rather a lot of money received it, and so everyone had to pay a tiny bit more tax.

Up jumps a politician, presumably trying to curry favour with those that stand to his political left, and shouts "this is unfair, I will stop it".

So we end up with a system that is complicated to understand, costs a large amount to administer (forget the additional costs in HMRC - the compliance burden on us, the taxpayers, has not even been taken into account), introduces a number of unexpected side effects (the tax reclaims from those filling in tax returns for the first time and finding they have £thousands in unclaimed pension contribution refunds) and instead of being a little bit unfair on a large number of people is very unfair on a smaller number (e.g. those with earnings between £50k and £60k who have extortionate marginal tax rates; those with two earners on £50k who escape the charge altogether).

Thankfully it seems that after this, the "pasty tax" and other bad decisions made against the advice of people who know what they are talking about and don't have a political axe to grind, the leaders of the current administration are being a little more circumspect regarding the political temptation to join in the Corporation Tax lynch mob, joining in the chorus of "hang 'em high" rather than carrying the rope.

This is just as well - so far we have only cocked things up for a few people with kids they can afford to feed a higher-than-ambient-temperature pastry-based savoury snack from time to time. Do the same damage to Corporation Tax and you risk cocking things up for the companies that sell the products and employ the people that generate the VAT, Excise Duty, Income Tax, and National Insurance that make up nearly 70% of the UK's total tax income.

although this being t'internet, you could be George Osborne and the head of the HMRC's love child, and we'd be none-the-wiser

I think my last post should help dispel that idea

Oh by the way, just wait for the release of the following cock-ups currently in the final stages of production:

RTI (Real Time Information) - coming to a payroll department (or family with a nanny) near you on the first payday in April.

Universal Credit - the transitional provisions mean that noone should be financially worse off when it is introduced - if it works. Unless you are self employed of course because they have invented a whole new method of accounting for you to use - which started off insane, has now been modified to merely useless but will never do the job it is intended to because, the accounting system we use In Real Life is the way it is because not everyone's profit can be measured by the amount of money that goes into the bank that week.

Compulsory Pensions for small employers - is it really worth setting up a scheme with contributions of £5 a week?

Since you mentioned the head of HMRC, you may be interested to know that this is Lin Homer who was previously head of the UK Border Agency and its predecssor within the Home Office. Her time there (2005-11) was not entirely without cock-up so we are in experienced hands.

When people upthread say 'keep claiming', could someone confirm that means 'do nothing at all and the money will keep arriving in your bank account'?, and that I don't actually need to do anything to keep claiming?

And presumably MrNC's already-complex tax return will now have a question about whether anyone in the household is claiming CB relating to children of his?

Haven't received any letters at all.

When people upthread say 'keep claiming', could someone confirm that means 'do nothing at all and the money will keep arriving in your bank account'?, and that I don't actually need to do anything to keep claiming?

Yes.

And presumably MrNC's already-complex tax return will now have a question about whether anyone in the household is claiming CB relating to children of his?

Actually he will need to put the amount of CB received - bearing in mind that the chargeable amount is for exactly 13 weeks in 2012/13 and 52 weeks in 2013/14.

Ooh, can I parachute in and ask a question. I am lucky enough to earn about 53k, but reduced by pension contributions (I have no idea what kind of system but they're deducted before tax in our PAYE system) of around 4k I think.

I also earn a bit of income via a rental property but we haven't had to submit a self-assessment form as we've only made a loss or tiny gain of a few tens of quid (offsetting mortgage interest, fees etc) so far and we're supposed to have, er, notified HMRC and had our PAYE adjusted . That's, er, still on my to do list..

So without the additional rental income, I'd probably just fall under the threshold which is why I haven't received a letter presumably; but if properly notifying said taxman, I'm better off going for self-assessment now right?

And, on the HMRC website the question do you earn more than your partner has three options: yes, no, don't know.

In my case there is a fourth. I earn EXACTLY the same as my partner. I know this is unlikely but it is true as we're on the same point on a salary scale and our rental income is shared. So we should BOTH be liable for half of any tax repayment, surely? Ha ha, will it just ANNOY HMRC if I ask them this...?

"I'm better off going for self-assessment now right?"

If you're making pension contributions and you are in the 40% tax bracket, almost certainly yes because you can get extra tax relief on those contributions. Same goes for your partner. I wouldn't try asking HMRC to do anything tricky just to make a point. If you get the payment and you earn above the threshold, put the CB on your tax return.

In my case there is a fourth. I earn EXACTLY the same as my partner. I know this is unlikely but it is true as we're on the same point on a salary scale and our rental income is shared. So we should BOTH be liable for half of any tax repayment, surely? Ha ha, will it just ANNOY HMRC if I ask them this...?

I was wondering when someone was going to ask this In fact the way the legislation is drafted, in theory you are BOTH required to pay the full charge. HMRC would obviously not apply this in practice, but as the mechanism doesn't exist to split the charge I would imagine they would just accept your election as to which one should pay it. Probably best to both declare the situation on your tax returns though.

If you're making pension contributions and you are in the 40% tax bracket, almost certainly yes because you can get extra tax relief on those contributions.

Not if they are deducted from gross pay, which is stated to be the case. Probably some professional subscriptions, gift aid, underpaid mileage, uniform etc. to claim though.

I really don't understand the pension element.
DH has a salary of £65k, he's on PAYE.
He salary sacrifices £300 pm for childcare vouchers (has done for years) He also makes salary sacrifices for Food shopping vouchers of £300pm and for medical cover £110 pm. GAYE for the year is £400 in total.
I am assuming only the childcare vouchers count here to reduce net eligible income? And possibly only £243 of that as that's the tax free bit?
His pension shows twice on his payslip as both a positive and negative figure of the same amount underneath his "basic salary" line.
Does that mean it is ineligible to be deducted?
This makes the difference to us between dropping into the 50-60 bracket or not.
I haven't opted out, as I'm so confused. I figure on waiting till April, seeing what it looks like then and opting out then if necessary

ALL (effective) salary sacrifices by definition reduce Gross Income by definition, and therefore Adjustable Net Income. However the BENEFIT you get in return for the salary sacrifice may itself be taxable, in which case it will be reported on a P11D and will increase ANI. Shopping vouchers and private health cover are almost certainly taxable benefits, as are childcare vouchers in excess of the eligible limit.

Different payrolls show pension contribtions in different ways: if they are salary sacrifice they don't need to show on the payslip atall so don't lose sleep over it.

You have now missed the deadline to elect not to receive CB for this week (the first week of the charge) anyway, so your husband will need to inform HMRC that he needs to complete a tax return for 2012/13.

Thanks MrA that makes more sense.
Do you often answer tax questions at 2am?!

"Do you often answer tax questions at 2am?!"

In January, yes

Always nice to be popular.

I'm a bit late to this issue. Have only lately stopped CB and now have been told I need to fill in Tax Self Assessment to pay back over-payments. I earn circa 20K, DH earns in excess of 70k. I was the one receiving CB - which one of us does the SA - does it matter? He already does SA, I'm PAYE? Am totally confused by all this (I consider myself to be averagely intelligent but am utterly confounded) have tried phoning HMRC but still don't fully understand, but they say he should do it. He's already sent in his SA and says his accountant (Financial Advisor?) has told him I should do it as he pays higher tax, so we keep going round in circles. Deadline is fast approaching - fines have been threatened and I don't know what to do. Anyone else in a similar situation and understands or am I the only one in this particular heap of doo-doo??

Coming late to this too, but can I also ask a question (apologies if already been covered)

I was a SAHM until August 2013. My salary is less than £20,000 pa.

My ex left in February 2012. Divorce came through in July 2013. I have continued to receive the CB for all this time. He earns WAY more than the threshold, but I am the one that has been receiving the CB.

Do I have to do something? Does he have to do anything?

Have had my head in the sand over this and just heard a radio ad at lunchtime and having a slight panic.

TIA

So much misinformation about national insurance credits on this thread and when mranchovy pointed it out he was asked if he was an employee of hmrc

You do not have to receive CB to get your NI credits - you just have to claim. The form is actually quite straightforward. You just have to tick a box to say you don't want to actually receive the payments.

"If you or your partner have an individual income of more than £50,000
If you or your partner have an individual income of more than £50,000, you may be liable to a tax charge called the 'High Income Child Benefit charge'.
You may decide not to get Child Benefit payments, because you don't want to be liable to the tax charge. It's important to still fill in a Child Benefit claim form, even if you don’t want to get the payments. This is because if you are entitled to receive Child Benefit, you can still qualify for credits to protect your State Pension."

Link to hmrc website here.

And no I don't work for them either but as dh definitely earns above £60k pa (and is not financially abusive) this was my only consideration when choosing whether or not to receive the benefit.

MrAnchovy, I'm staggered that the legislation would have two earners between 50-60k BOTH pay back the child benefit! We are likely to be in that situation for 13-14 tax year. For some reason (probably CB) I have been summoned into doing a tax return for 12-13 although my income isn't in the higher rate band at all. (It might have briefly been a bit into higher rate the year before. They did a load of recalculating my tax code, I had a new one about every other week for a period of 2011.)

If I was higher rate and actually taking this years tax return seriously, I would have this question for you: do subscriptions to charitable organisations (e.g. English Heritage, Royal Horticultural Society) count as charitable donations? When I signed up for a direct debit annual membership they had a gift aid tick box, so they are getting the basic rate tax back from the Treasury. If I had paid HRT, would I get the other 20% back?

We've been continuing to claim CB as DH's basic salary is under the threshold. He usually gets a bonus that takes him over, but there's no guarantees as a bonus is a bonus, not a salary.

We've just done our self assessment forms, and despite HMRC clawing back our child benefit, what with pension relief and other tax reliefs, HMRC actually owes us over £300.

Had they not wanted to claw back CB, DH wouldn't have bothered filling in a tax return. I wonder how much the government will end up out of pocket over this nonsense.