100-120k PAYE earner single household income and received another tax bill

[taxhelpneeded]

I'm a SAHM and my DH earns just over 100k. I know that seems like a lot to some people but we are a family living in central london with housing costs of almost 50% net income. after bills, commuting costs, food (tight budgeting Lidl etc), work expenses, we only just break even (kids are under school age or in state school so no fees, no fancy holidays, cars, or technology). DH has to do a tax return as a high earner (and because I claim child benefit) and we've just been told we owe another £750. is this because of the loss of personal allowance over 100k so that between 100 and 120k you actually pay 60% tax? this seems so unfair. everything he earns is PAYE so why do we always end up with additional tax owed? he actually has costs associated with work of about 2-3k a year but we can't claim any of this because he is an employee. I was recently offered a full time job but the cost of covering childcare for the hours plus the commute was going to make us £200 a month worse off. And we simply can't afford this right now.

We've never used an accountant as to be honest, we didn't have any spare income to pay for one but now I am worried that maybe there is some sort of mistake in his tax or maybe we should be doing something differently. He pays into a work pension but I have no pension. Could he pay into an additional private pension to save tax? Can he only do this in his name or could he set one up for me (we both regard his income as joint income but I can see that HMRC don't view it like that - until they want the child benefit back...) Do we need an accountant or a financial adviser? Can we get one off advice for a set fee? How much would this cost and can anyone recommend a good one?

Thanks for reading if you made it all the way through...

What does your dh do when he sends in his tax return to ensure he has declared the right amounts - has he used a tax calculator online to get a estimate? My dh earns over the threshold for Child Benefit. So we send in a tax return and repay the child benefit but as long as we return the paperwork within deadline that is all we owe. So unless the full amount of child benefit owed was not paid then it should be the same for you. My DH is PAYE as well.

Do you have a copy of the tax return for last year and does the tax demand say what year it relates to?

CAB Advice Guide site on Tax

In the same situation.
If the money you owe is less than £4k you can opt to spread it out over your dh's paychecks.
You could both use your tax allowance if you have, for example, shares to cash in. Think that's up to £10k. In which case it would probably be worth getting some advice. (But have never been in this position so can't say any more than that.)
Otherwise I think you just have to suck it up (as we do).
Hopefully the system will change again in another few years.

Hi bigmouth. Thanks for the reply.

We just submit the figures from his P60 but we always owe more than the child benefit repayment. I think it's because you lose your personal allowance when you earn over 100k.

I've read that it means people earning between 100 and 120k randomly pay 60% tax. It seems a bit unfair (the institute for fiscal studies apparently also says it's unfair) and I wondered if this is the extra tax we're paying. And whether we can make additional pension contributions to avoid it.

Thanks yomellamo.

We are just paying it but I'm just wondering if we can avoid it next year.

I wish he could go part time and I could work full time. We could earn a lot less and actually take home loads more! Seems ridiculous.

Yes, it's the withdrawal of the personal allowance.
www.gov.uk/income-tax-rates/income-over-100000
Once you take into account NICs on top, it's quite punitive for that portion of your income.

Totally sucks

I thought high earners lost the child benefit or else had to pay it all back if they still claimed for it via the earners tax?

He doesn't work for a large corporation that is dear to everyone's hearts based in West London does he?! My DH is similar and although we don't claim CB any more, he obviously still does a tax return - and every sodding year he has a massive tax bill - he's paying over £300/month back at the moment. I keep saying that his Payroll are incompetent because surely there is software that does the calculations to ensure that it's done properly, but he just shrugs and says he has to pay. I sometimes wish I was still earning - I was earning just under the six figures and if we'd both gone to 4 days or something, we'd be so much better off.....

You are not allowed to claim Child benefit as your DH earns so much. Dh earns less than your dh but with my income (small Pt job) we are earning too much to be given CB. If you earn as much as your family does you c
You can either:
stop getting Child Benefit - sometimes known as ‘opting out’
carry on getting Child Benefit and pay any tax charge at the end of each tax year

We choose to keep receiving the CB but we put it in an account and just pay it back every year. This is because Dh read that if you opt out of CB permanently you wouldn't be able to claim it again if a new govt decided to reintroduce it for higher earners in the future. So for now, we have decided to keep getting it paid and paying ti back. The amount you are repaying is probably paying back the CB.

check this out here [https://www.gov.uk/child-benefit-tax-charge]

oh sorry took too long to post. Just noticed that you are also losing personal allowance. That does suck!

Hi. Thanks for the replies.

Yes I know we pay back cb. That's fine. (Obviously hits single income households harder but whatever...) I claim it in principe as its pretty much the only way the state recognises the status of parents staying at home with their kids.

It's the extra loss of personal allowance which is extra harsh.

And yes, why can't they just work it out at the time? He has a fixed annual salary and its all PAYE.

Sorry don't want to say where he works

I am totally fine with paying LOTS of tax. But I do resent the random unfairness. We get hit by the cb charge despite having friends where both people work who earn a lot more than us. and now the loss of personal allowance on top so we pay a higher rate than those earning over 120k?

It would be so much better to work a lot less and earn a lot more!

Ps I think the cb has already been taken into account in his tax code. I think the 750 is the list personal allowance bit. But his tax code changes all the time and I don't pretend to understand it (neither does he).

I sometimes feel like a mug tho as we have kids with health issues so I'm at home. He works very long hours in a stressful job. We pay a lot of tax and then you hear about the mega wealthy paying next to nothing.

You can put money into a private pension for you even as a non-taxpayer and get government tax relief at the ordinary tax rate (so £60 per month with max monthly payment from yourselves of £240)

Extra pension contributions from your DH pre-tax income is possible, perhaps his company could advise in the first instance. But definitely get them to look at his tax code!

Look through the HMRC website thoroughly, I know people who have spotted errors who are not accountants, just motivated by painful tax demands!

Thanks funnyossity. I'll look into it.

Get an accountant to help you. Mine chargers £80 to do the tax return and he always saves us more than his fee.

Do you make charity payments? If so you can claim the 20 percent back on those which reduces your tax bill.

Why on earth would you claim child benefit. You're not entitled to it. In claiming it you are simply creating admin and cost. It has to be paid to you and you then pay it back. Completely pointless waste of time and money and nobody benefits from you "taking a stand" including you.

If you didn't claim CB it doesn't sound like your DH would even be required to do a tax return and so you'd be better off right from the outset. Your DH will gradually lose his personal allowance over £100k but only on that little slice of income but if he is PAYE everything will be done through his employer.

My DH earns in that 100k-120k bracket and is increasing his pension contribution to make the top slice tax efficient. Can't your DH just increase his contribution to his employers scheme rather than set up another pension?

Why shouldn't she carry on claiming CB MaCosta? I still claim it even though we're not 'entitled' to it anymore. What if something happened and she had to reclaim? How long would the process take to re-instate it? After all HMRC aren't well known for their efficiency. Also, what if the next government re-instates it, but only for a certain number of children but that it was not retrospective? She could lose out further. I still claim it on principle because this policy has pissed me off and I want to cause them as much hassle as possible.

I am entitled to Child benefit. The govt has chosen to drive a coach and horses through the principle of independent taxation by reclaiming it through a partner's tax. That's between my dh and HMRC. Nothing to do with me.

claiming cb is also is a very simple way to protect my NI contributions while the children are young and I'm not working. The cb charge was introduced in a fairly shambolic and inequitable way and most sensible people suggested that women (and it is mostly women who claim) keep claiming rather than rely on the state not fucking up their NI record or in fact hoping their partners will continue to contribute this specific amount of shared income directly to the kids. I might be a SAHM but I don't tend to mindlessly hand over financial power to my dh.

He has to fill in a tax return as he earns over 100k. Nothing to do with the cb. That's just another box to tick on a form we'd be completing anyway.

But thanks v much to the poster who answered my question about avoiding this punitive top slice of tax.

£2880 is the contribution that can be made to your personal pension that gets topped up to I think its £3600.

No, that's wrong.

"There is a subtle difference between claiming child benefit and receiving child benefit. It is important to make the claim and establish that you are entitled to receive it as this brings several benefits. These include National Insurance credits that may increase your entitlement to state pension; helping to protect your entitlement to other benefits; and ensuring that your children are automatically issued with a National Insurance number before their 16th birthday.
National Insurance credits, previously called Home Responsibilities Protection, are generally given to the parent entitled to child benefit. Even if you decide to stop receiving your child benefit payments, it won’t affect your National Insurance credits. However, if you had never actually claimed child benefit in the first place, you would not be entitled to the National Insurance credits that attach to child benefit."

By taking the child benefit and repaying it through your DH's tax you are adding to an already overburdened system and costing us all money. I just don't understand the point of it.

MaCosta if you earn over £100k you have to do a tax return anyway? Regardless of CB etc.

Earnings between 100-115k are taxed at 60% (as a marginal rate) then it drops back to 40% to capture the personal allowance back.

Obviously you've never had to rely on the state being efficient at doing what they're supposed to do (refund tax when appropriate, pay disability or unemployment benefits on time).

Are you saying I should just ask my dh nicely to continue to pay the kids their cb? And if he dies i fill in my cb form at the funeral and then hope hmrc are efficient at sorting out my claim? ho ho ho.

How's life looking in 1950?

Your DH is better to pay more into his pension than to pay into yours (although it might be worth you having your own pension for other reasons). In very basic terms he is taxed at 60 percent on his income above 100k. He will therefore receive the net income (i.e 400 for every 1000). he can then put £2800 into your pension and you will receive 20 percent tax back on that (into the pension pot) but only 20 percent of the 400 i.e 80. So of his £1,000 he has managed to put 480 into a pension pot.

If he puts the 1000 directly into a pension pot he will have it paid in tax free at his rate of 40 percent but he has retained his personal allowance.