Child Benefit Scrapped For Higher Rate Tax Payers From 2013

[alferret]

About time, but why wait till 2013? 2011 sounds better to me.

[danielf]

Originally Posted by Flyboy

Well that is hardly the five per cent mentioned by Wayfair and fifteen is most certainly closer to twenty than five is.

Yes, but it's 15% of families currently receving CB which is not the entire population. So 5% of the population seems a fair estimate

[Flyboy]

A few years ago the inland revenue made a mistake with one of my employee's PAYE. He was paying higher rate tax when they weren't taking account of certain allowances. This went unnoticed for about two years. If they make mistakes like this again, will they repay unpaid child benefit as well? I doubt it.

Originally Posted by Flyboy

A few years ago the inland revenue made a mistake with one of my employee's PAYE. He was paying higher rate tax when they weren't taking account of certain allowances. This went unnoticed for about two years. If they make mistakes like this again, will they repay unpaid child benefit as well? I doubt it.

That is a pretty absurd confluence of events you have concocted though. In the event that someone is mistakenly taxed at 40%, and somehow doesn't notice he is being taxed at 40% for two years, and is claiming child benefit which is then stopped (surely that might rise a red flag in the reduced salary doesn't?) then you hypothetically suggest that benefit won't be paid?

[danielf]

Originally Posted by Damien

That is a pretty absurd confluence of events you have concocted though. In the event that someone is mistakenly taxed at 40%, and somehow doesn't notice he is being taxed at 40% for two years, and is claiming child benefit which is then stopped (surely that might rise a red flag in the reduced salary doesn't?) then you hypothetically suggest that benefit won't be paid?

Actually, it's pretty certain the employee would notice being incorrectly taxed at 40% if his child benefits were stopped. Good diagnostic!

[Flyboy]

Originally Posted by Damien

That is a pretty absurd confluence of events you have concocted though. In the event that someone is mistakenly taxed at 40%, and somehow doesn't notice he is being taxed at 40% for two years, and is claiming child benefit which is then stopped (surely that might rise a red flag in the reduced salary doesn't?) then you hypothetically suggest that benefit won't be paid?

I have not "concocted" anything. He had income form other sources and assumed it was those that caused him to exceed the higher rate tax threshold. If UI remember correctly, the inland revenue had not accurately taken account of tax credits paid for share dividend. When the mistake was rectified it was discovered that his total income was below the threshold for higher rate tax.

Another example could be highlighted by paying pension contributions via a carry forward/carry back process. Which could have the effect of reducing ones marginal tax rates, over a seven year period. Which would mean that someone who is rich enough to maximise their pension contributions, for those years, will be given a bit of a boost by having their child benefit paid. Whereas someone who is not as wealthy, will have theirs cut.

---------- Post added at 12:33 ---------- Previous post was at 12:29 ----------

Originally Posted by danielf

Actually, it's pretty certain the employee would notice being incorrectly taxed at 40% if his child benefits were stopped. Good diagnostic!

Have you ever tried to get HMRC to rectify mistakes before? It isn't easy.

[Ignitionnet]

Originally Posted by Flyboy

Another example could be highlighted by paying pension contributions via a carry forward/carry back process. Which could have the effect of reducing ones marginal tax rates, over a seven year period. Which would mean that someone who is rich enough to maximise their pension contributions, for those years, will be given a bit of a boost by having their child benefit paid. Whereas someone who is not as wealthy, will have theirs cut.

Just goes to show you can't please everyone or get things absolutely right I guess. Cases like this will be a small minority of those impacted. The vast majority will be people like me who don't have a legitimate complaint to make at all.

You seem to be consciously and actively looking for faults with this? I'm sure there will be plenty of scenarios that can be concocted, doesn't change that it has to be done and kudos to this coalition for, again, taking a difficult decision instead of delaying it or simply throwing money at issues.

[danielf]

Originally Posted by Flyboy

Have you ever tried to get HMRC to rectify mistakes before? It isn't easy.

I don't doubt that, but I don't think it's an argument against removing child benefits for high earners.

A figure of 1.2 million families who will be affected is being estimated - but how many of those are single income earners, just over the limit; that is the figure we need to assess the (negative) impact, not the gross figure of 1.2 million.

[Taf]

Originally Posted by Ignitionnet

I am lost as to what that would do to bring down the fiscal deficit, could you explain?

DVLA calculated many years ago that revenue lost by non-payment of Road Fund Licence fees could be recouped by scrapping the Tax Disk and by adding just 1p or so per litre to petrol and diesel (at rates of that period). No way to dodge the revenuer then, plus those who drove more, or whose cars guzzled more fuel, automatically paid more. The way was then open for the replacement of the Tax Disk with a combined MOT/Insurance disk, issued by MOT stations and insurance companies. Plus costs of chasing Untaxed drivers fell to zero, increasing overall income to DVLA, thus to HMG.

[Flyboy]

How many of the remaining five million families will be dual income earners, each earning an average of twenty-five thousand pounds a year? A good deal more than those single earners, earning more than forty-four thousand.

[danielf]

Originally Posted by Flyboy

How many of the remaining five million families will be dual income earners, each earning an average of twenty-five thousand pounds a year? A good deal more than those single earners, earning more than forty-four thousand.

It seems to me there are two issues here: One is whether high earners should receive CB. The second is whether there should be a difference between single and dual income families. I think the answer to both should be 'no'. Unfortunately the answer to the second question presently is 'yes'. It's still better than doing nothing at all though. This move will mostly affect high earners, as there will be dual income families amongst those affected as well.

[Ignitionnet]

Originally Posted by Flyboy

How many of the remaining five million families will be dual income earners, each earning an average of twenty-five thousand pounds a year? A good deal more than those single earners, earning more than forty-four thousand.

No idea but it's irrelevant. This is being done to cut the structural deficit by lowering the welfare bill not to redistribute wealth. With that in mind it's as fair as it's possible to be while still achieving its' aim.

[Flyboy]

Originally Posted by danielf

It seems to me there are two issues here: One is whether high earners should receive CB. The second is whether there should be a difference between single and dual income families. I think the answer to both should be 'no'. Unfortunately the answer to the second question presently is 'yes'. It's still better than doing nothing at all though. This move will mostly affect high earners, as there will be dual income families amongst those affected as well.

So, those who have a joint income of eighty thousand pounds, should be treated more favourably to those who have an income of only forty-five thousand? To a family of four or five, forty-five thousand is not being rich. It is the net equivalent to two people earning twenty-one thousand pounds each. Something that an office administrator, teacher, nurse, call centre worker or shop manager would earn

[danielf]

Originally Posted by Flyboy

So, those who have a joint income of eighty thousand pounds, should be treated more favourably to those who have an income of only forty-five thousand? To a family of four or five, forty-five thousand is not being rich. It is the net equivalent to two people earning twenty-one thousand pounds each. Something that an office administrator, teacher, nurse, call centre worker or shop manager would earn

As said: the implementation is not necessarily fair, but the move itself is good in my opinion. Over a certain income individuals should not be looking at the state (or tax benefits) to support their children. And if you can't afford it you shouldn't have four or five children. Ideally, this would be tapered and looking at joint income. I think there is something to be said for avoiding the administrative cost of doing so though.