Changes to child benefit -implementation

[Kangarobber]

Could someone please explain to me how the Govt are implementing the removal of child benefit next year from hoseholds where one or more adults earns in the higher tax bracket? Or if the details have not yet been announced, what theoretical scheme they might use for it please?

I claim child benefit and earn less than my personal allowance each year. I also have that home responsibilities thing (can't remember the details). DH earns in the bracket that will be affected. He thinks they will rely on either me stopping claiming it, or I will be able to go on claiming it, but then he will have to declare on his tax return that I claimed it and it will get clawed back at that point.

Is this possible or even a realistic method for implementing this change? If nott, how will they do it?

threshold is being reduced quite alot over the next few years isnt it? i thought it was being reduced to 35k p/a

It's a bit of a sneaky move really, given the "average wage" calculations for the benefits cap, most "average" people will be HRT payers and lose CB, people on benefits will effectively lose CB to the UC. Methinks they are trying to ditch it quietly.

Agincourt remember the threshold quoted usually doesn't include tthe personal allowance, so you need to add that back on top to get the amount of salary earned to fall into the HRT band. See here for explanation of 2011-12.

So, for 2012-13 the personal allowance is £8,105 and the HRT threshold is £34,370 (total = £42, 472) compared with 2011-12 personal allowance of £7,475 and HRT threshold of £35,000 (total = £42,475), i.e. the total will go down only £3 because of the increased personal allowance.

It is silly though that they are currently planning to limit the universal benefit to 26K = 35K gross; those with a HRT who are deemed "rich" will only be getting 7K more (at present); once you take off work-related travel and childcare costs, prescription costs, free school meals etc, which can easily come to &K a year or more, I doubt the "rich" family with an HRT are actually any better off than the family who are so "poor" they are on "only" 26K net.

Where is the incentive to work, let alone work hard and get promoted to a HRT job if you are then to lose your CB and possibly be worse off than on benefits?

Should add that it's not I think people on 26K benefits are outrageously loaded; rather that I think someone earning 42K to support a family is not loaded either, and can no more bear the loss of that CB than the family on benefits.

HRT and the concept of different tax rates kicking in at different thresholds is already a disincentive to work hard and get promoted, even if you don't have children. A person earning £50,000 pays £14,391 in tax and NI (29% lost in deductions) A person earning £25,000 pays £5,637 in tax and NI (23% lost in deductions) I've long supported the idea of a flat rate income tax as I think it would be fairer and would remove the disincentives.

Yep, I too would love a flat rate system coupled with a high tax free threshold like £15k.

And to just merge NI into income tax so there's no sleight of hand by saying "We will not raise income tax" then push up NI instead.

But imagine the outcry when people can easily see how much tax they are paying!

HRT and the concept of different tax rates kicking in at different thresholds is already a disincentive to work hard and get promoted, even if you don't have children

I disagree!

I do think NI and income tax should e combined as they all go into the same pot anyway.

I don't think they should be combined, as that would make a massive tax hike for pensioners.

You could have a different personal allowance if you're a pensioner thus reducing tax paid?

There is already a different personal allowance for pensioners that is gradually withdrawn depending on the level of income and is quite complex. The point that Edith is making is that pensioners afaik, don't pay NI.

Yes I know. So if you merge NI and tax, you adjust the PA further to allow for that.

How are you going to define a pensioner? I think that system, which looks the the person, rather than the type of income, is likely to introduce a number of anomalies, and be exceedingly complicated to administer, especially as working patterns are no fixed.

Surely that's an issue for NI already then?

Actually it isn't: it's related to type of earning, and people pay NI on those income streams related to paid employment, and employers also pay.

PA are applied to all forms of income.

When you look at the multiplicity of types of pension, pensionable age, overlapping work and pension etc, it becomes as clear as mud, and the likelihood of unintended consequences is far higher them on "simple" changes like abolition of 10p tax rate or proposed changes to CB.

So I ask again, if you want to change PA, who will you be changing it for? What is a pensioner in these circumstances?

Well some of the historical reasons for NI don't apply as they did before. So why do we still need it?

So changing the PA would help adjust for getting rid of it but create winners an losers unfortunately. I'm not saying that's the answer but it's the only one I can think of right now. NI is payable on certain conditions so can those conditions be applied in a simpler form to PAs?

What would you suggest?

I am not proposing the abolition of NI; I think the distinction between earned and unearned income is useful. I even quite like the restriction of some benefits only to those who have made contributions (symbolic reasons as much as anything else). So my suggestion is to leave NI alone.

I don't think benefits should be based on contributions - philosophically that doesn't sit right with me. I think the welfare state should act as a safety net (which it does do in some ways but not in others).

I also think NI creates the impression that you're paying for something specific, which you're not, hence getting rid. No idea of the logistics or practicalities though.

Very few are contributions based now. I decry their abolition because I am a fervent supporter of the Bevanesque vision of the welfare state, rather than the slimmed down, utilitarian "safety net" approach that I think is very divisive.

I do not think it is wise to propose the abolition of a functioning part of the revenue and welfare system without having some idea of the logistics and practicalities (takes us back to the start of the thread, and the weaknesses in the current CB proposals that were so ill thought out).

Well I start from the view that NI sends out the wrong message so should be changed. Not being a tax expert, I couldn't possibly come up with a decent solution but I'm sure there is one (even it it is make it clear what NI is for).

There are many sections of society who cannot contribute hence my reasoning that there should be a safety net for all if needed, regardless if one is considered deserving or not.

Can I ask what I am sure is a stupid question?
The problem seems to be that this relies on the family / household income rather than being a universal benefit. So in the situation where the mother is not a higher rate tax payer but her OH is, she may not know or have been told.
How is that any different to tax credits, which also rely on the household income? Surely they must ahve processes in place to ensurethe declared family income is as declared?

Surely they must ahve processes in place to ensurethe declared family income is as declared

They should. But don't check every application - it's done on a sable basis iirc. I was the victim of fraud as someone had used my name, address and NI number to claim tax credits and my post was intercepted until one day a letter got through and I rang them up. I was because if they'd checked my NI number and tax paid they'd have spotted that I earned too much

Iggly: there is a safety net for all in the existing system - indeed there always has been. the Bevanesque vision was about so much more than that though.

Stealth: for joint household benefits, you have to apple together so details of both at included. CB currently gives both NI credit and cash element to one person and no details of third parties are required. Turning it to a household- based payment would not deal with the NI credit issues, but would violate the principles of independent taxation. Of course, taxation has not always been individual, and there's no reason to think it must always be in future, but if it is to be abandoned, I would rather see it happen after proper consideration and debate.

It doesn't seem to be going that way though!