Wednesday, 19 December 2012
Saturday, 17 November 2012
You can call CPP in office hours free from a landline on 0808 156 0199
Thursday, 8 November 2012
If you get child benefit and you or your partner has an income over £50,099 a year some or all of your child benefit will be taken back in extra income tax. It is called the Child Benefit High Income Charge. If the income is over £60,000 you may prefer to give up the child benefit than pay the charge. But there are alternatives - see 'Avoid the charge' below.
The rules are complicated and may seem illogical and unfair.
The tax charge began on 7 January 2013. No-one has their child benefit itself taken away. Instead the partner with the higher income pays an extra income tax charge. If their income in a tax year is £60,000 or more the tax charge will equal the child benefit. For a household with three children child benefit is worth £2549.30 in the year 2015/16. So the extra tax will also be £2549.30 (confusingly there are 53 child benefit payments in the tax year this year). It will be collected through self-assessment. If you do not already fill in a self-assessment form you will have to in future. The Revenue estimates that an extra 350,000 people will have to fill in a self-assessment form as a result of the charge. But 45,000 of them may have failed to do so.
If the partner with the higher income gets £50,100 to £59,999 a year the tax charge is less than the child benefit. It will be 1% of the CB for every £100 by which income exceeds £50,000. So if income is £55,000 the tax charge is 50% of the CB. For a household with three children that would be £1250.60 in 2015/16. Work out the charge for earlier years on the official calculator. See 'Avoid the charge' below.
The charge is assessed on the partner with the higher income. If one partner has an income of £60,000 and the other partner has no income then the full tax charge will be made and every penny of the Child Benefit will be taken back in tax. On the other hand if both partners have an income of £50,099 no charge is made even though their household income is more than £100,000.
Paying the charge
The charge began on 7 January 2013. If it applies to you for 2012/13 then you should have informed HMRC by 5 October 2013 and registered for online self-assessment. If the charge begins in subsequent tax years then you must tell the Revenue by 5 October in the next tax year. Click here to tell HMRC. You then have to submit your form online by 31 January in the next tax year. If you are an employee and the total amount due under self-assessment is £3000 or less then it can be paid through your tax code. The full charge itself will be more than £3000 in a tax year if you have four children or more.
If you miss the 5 October deadline then HMRC may charge a penalty as well as the tax when your self-assessment is worked out. The penalty can be up to 100% of the tax due on the child benefit. But HMRC says it only want to charge the big penalties to those who have deliberately avoided paying the tax charge. You can appeal against a penalty.
HMRC estimates that 1.1 million people will be subject to the charge.
The charge is due from the date your first child is born or the date one partner or the other has an income over £50,099. You can choose not to claim child benefit for the child. Otherwise the partner with the higher income will have to pay the tax charge.
If someone who gets child benefit lives alone then it is their income which is assessed. If they live with another person as a married couple or as civil partners then the partner with the higher income is assessed and – if their individual income is more than £50,099 – charged. It does not matter whether two people are married, including a same sex marriage, or in a legal civil partnership. If they live as if they were in one of those relationships then they are counted as partners. And it does not matter whose children the child benefit is paid for.
This rule can lead to anomalies when relationships begin and end.
- Amanda Smith is divorced and has two children. She earns £35,000 a year and gets £1823.20 in 2015/16 in child benefit. Her income is below £50,099 so the tax charge does not apply to her. She meets Charles Wright. After a few months they start living together. He earns £61,000 and has to inform HMRC and pay the extra tax charge of £1823.20 even though the children are not his and he contributes nothing directly to their upkeep. On the other hand their biological father James Smith, who pays maintenance for his children and who earns £95,000 a year, pays no extra tax.
If you live together for part of the year then the higher earner only has to pay the charge for that part of the tax year. That can get very complicated especially if both partners have an income above £50,099.
If your partner will not tell you if they get child benefit or what their income is then you can ask HMRC. It will answer two questions - 'Does my partner xxx receive child benefit?' and 'Is my partner xxx's income higher than mine?'
Marginal tax rates £50,100 to £59,999
A person liable to the charge whose income is between £50,099 and £60,000 faces very high rates of tax on each extra pound they earn. They pay income tax at 40%, National Insurance at 2%, and then the child benefit charge. If there are three children that charge is 25.5%. That means for every extra £100 they lose two thirds of it to tax and keep just £32.50. If they have a student loan and pay the graduate tax of 9% they will keep less than a quarter of any extra earnings, losing £76.50 of every £100 to tax.
The more children there are in the household the higher the child benefit tax. If there is one child it adds 11% to the tax rate. For two it is 18.2%, three children is 25.5% and four adds 32.8%. Five children adds 40%. If there are eight children it is 61.8%, taking the total tax take to more than the money earned. For every £100 earned the total tax is £103.80. And if graduate tax is paid then a partner in a seven child family will pay £105.50 on every £100 earned. In other words they will be better off not earning the extra money.These calculations use the 53 week child benefit year for 2015/16.
The child benefit tax charge means that anyone with even one child and an income between £50,099 and £59,999 will pay a higher marginal rate of tax than someone with an income of £1,000,000. Everyone with even one child will pay at least 53% in tax for each extra £1 earned. That is a higher rate than the 47% income tax and NI charged on those with an income above £150,000. And even higher than the 52% that was due in 2013/14 before the additional rate was cut to 45%.
The income which is assessed is called 'adjusted net income’ though in fact it is more like gross income before tax. It is your total taxable income from all sources including earnings, rent, dividends, and savings interest before any tax allowances are deducted. However, you do adjust it by deducting pension contributions, gift aid donations, and salary sacrificed for child care vouchers or a cycle to work scheme. So someone who earns £60,000 and would face the full 100% tax charge could pay £10,000 gross into a pension scheme and avoid the charge altogether. As most of the contribution would be tax relief that would be a very good deal. But check that the pension tax rules allow you to make that contribution.
For people with simple tax affairs who are employees then the key figure is on their P60 form. That is given to every employee after the end of the tax year. Find your P60 for 2014/15 and look at the pay box 'total for year'. If that is £50,099 or less and you have no other income then no tax charge will be due and you do not need to register for self-assessment. If it is more than £50,099 then you may have to pay the tax but you can deduct the gross amount of any Gift Aid payments or pensions you pay into separate from your job. If you have more than one job or you get a pension and pay then you will have to find all your P60s and add up the total income boxes.
You can check your net adjusted income using the official calculator. Put the P60 figure in the 'Salary before tax' box. Assume that includes taxable benefits and deducted amounts like work pension contributions, cycle to work scheme and childcare vouchers. Then put in other income including income from savings and any pension contributions or gift aid donations. Gross amounts in both cases. That should give the correct figure for your adjusted net income.
Avoid the charge
You can avoid the tax charge and the hassle of self-assessment if the person who gets the child benefit tells HMRC they do not want to receive it. The child benefit will stop and the tax charge will not be due for subsequent tax years - though if any child benefit is received in a tax year (6 April to next 5 April) then the higher earner will still have to be in self-assessment and pay the tax on the child benefit received for that year.
Although child benefit is not received, entitlement to it will continue. So it can be reinstated if circumstances change and National Insurance credits will continue to be available for the person entitled to it. Those credits build up entitlement to state pension if National Insurance is not paid at work.
Giving up child benefit should not affect a current or future entitlement to widowed parent's allowance as you will still be 'treated as entitled' to child benefit even if your late spouse/civil partner or you have given it up.
If you give up child benefit but it turns out that the tax charge is not due you can reclaim it for up to two years.
Giving up child benefit is only sensible if the higher earner has an income well above £60,000 and the relationship between them and the person entitled to child benefit is stable. Even then there are good reasons for keeping the child benefit. It can be put into a savings account where it will earn interest and the money in the account can be used to pay the tax charge up to 21 months later leaving a small profit on the interest. If the account is an ISA no tax will be due on the interest.
In 2015 the Revenue estimated about 800,000 people have given up their child benefit to avoid the tax charge.
This brief guide covers the basics. Always get advice and study official documents before making changes in your personal circumstances. The Government has some information here.
5 August 2015
Tuesday, 2 October 2012
Monday, 24 September 2012
Andrew Mitchell agrees to pay PC Rowland £80,000 in damages for falsely accusing him of lying. Mitchell will also have to pay some or all of Rowland's costs which are still to be determined. More here.
UPDATE 27 NOVEMBER 2014
Mr Justice Mitting ruled in the High Court today 27 November 2014 that Andrew Mitchell did use the word 'pleb' and that the account of what he said by PC Toby Rowland was substantially true.
"I am satisfied at least on the balance of probabilities that Mr Mitchell did speak the words alleged or something so close to them as to amount to the same including the politically toxic word pleb."
Mitchell was suing The Sun newspaper for a September 2012 report in which it alleged he said to police who would not let him ride his bicycle through the vehicle gate
"Best you learn your fucking place - you don't run this fucking country - you're fucking plebs."
PC Toby Rowland was present at the time and wrote the words in his notebook. He counter-sued when Mitchell effectively called him a liar who had made the words up. Although Mitchell admitted to using the word 'fucking' he denied using the word 'pleb'.
But the judge said PC Rowland "was not the sort of man who would have had the wit, imagination or inclination to invent on the spur of the moment an account of what a senior politician had said to him in temper".
UPDATE 10 JANUARY 2014
PC Keith Wallis admitted he lied when he gave an account of Andrew Mitchell's confrontation with police at Downing Steet. He was not present. He pleaded guilty in court to misconduct in public office and will be sentenced later.
UPDATE 16 OCTOBER 2013
Evidence is growing that the police fitted up Andrew Mitchell after the incident with his bicycle at Downing Street more than a year ago. Deciding between two competing accounts by a politician and a police officer is always difficult. But clearly the recording of the meeting between Mitchell and the Police Federation three days after the event shows the officers' account of it given immediately afterwards to the press was not correct. When they gave it they did not know Mitchell was recording it. The Independent Police Complaints Commission has criticised the three officers concerned and the lack of disciplinary proceedings against them http://www.bbc.co.uk/news/uk-24536328
At the end of March 2013 Andrew Mitchell issued libel proceedings against the Sun newspaper for its story about these events.
It is the first clause in the newly published verbatim rant of Chief Whip the Rt Hon Andrew Mitchell MP which I find the most offensive. To a police officer doing their job and following the security rules they had been told to follow – ‘Best you learn your f------ place’. Oh dear.
Wednesday, 19 September 2012
UPDATE 9 MARCH 2017
In his Spring Budget, 8 March 2017, Phillip Hammond confirmed that the tapered loss of this benefit was a tax. He confirmed the reduction in the taper rate by saying "the Universal Credit taper rate will be reduced in April from 65% to 63%, cutting tax for 3 million families on low incomes."
UPDATE 24 NOVEMBER 2016
In his Autumn Statement on 23 November 2016 Chancellor Philip Hammond announced that the taper rate for Universal Credit would be reduced from 65% to 63% from April 2017. That will make very little difference to the figures in this blogpost paper. In the final calculation it allows claimants to keep 80p of every pound earned rather than 81p. The calculation is shown at the end of this blogpost. It will be fully updated in April 2017.
UPDATED 11 APRIL 2016
The latest council tax support details have been published and are incorporated in the blogpost.
Householders who get the new means-tested benefit called Universal Credit could keep just 19p of every pound extra they earn – an effective tax rate of 81%. In some parts of England it could be more - losing 82p to 83p in every pound that is earned, leaving them with 18p to as little as 17p for every extra pound they earn. Those losses are similar to many under the present system and could undermine the work incentives which the new system is designed to create. And for graduates on incomes above £17,495 but low enough to get Universal Credit, the deductions would be more, adding about 2.5 percentage points to those figures. Worst case would be earn £1 keep 14.5p.
|Net after tax||£0.68|
|Net after UC||£0.24|
Net after tax
Net after UC
9 March 2017
Thursday, 30 August 2012
UK expats living in some other European countries can claim the Winter Fuel Payment this winter. To qualify this winter 2015/16 they must have been born on 5 January 1953 or earlier and have 'a genuine and sufficient link to the UK'. They must also live in one of 25 countries listed below. From Winter 2015 it is no longer paid in seven warmer EU countries.
Until 2012 people who lived outside the UK could not claim the Winter Fuel Payment. If they had already qualified and claimed it in the UK they could keep it if they moved, but they could not claim it for the first time from outside the UK.
The change was brought about by a judgement of the European Court of Justice in a case about disability benefits. The court ruled that it was wrong to prevent people from claiming the benefit just because they did not live in the UK at the time of the claim. As long as they had what is called 'a genuine and sufficient link to the social security system of the UK' they can claim from another European country. The DWP interprets that as meaning that the person worked and paid National Insurance in the UK for a long period of time, certainly enough time to qualify for a state pension. The new rule began on 16 September 2013.
The Winter Fuel Payment is £200 per household where a qualifying person lives. So a couple will normally get £100 each. If someone is over 80 (born 27 September 1935 or earlier) the payment is £300.
Payments cannot be claimed for earlier winters. A loophole which allowed some payments from the late 1990s to be claimed was closed from 1 April 2014.
Claims for this winter 2015/16 can be made by people living in Austria, Belgium, Bulgaria, Croatia, Czech Republic, Denmark, Estonia, Finland, Germany, Hungary, Iceland, Ireland, Italy, Latvia, Liechtenstein, Lithuania, Luxembourg, Netherlands, Norway, Poland, Romania, Slovakia, Slovenia, Sweden, or Switzerland.
The payment is not made to people living in the Channel Islands nor the chilly Isle of Man because they are outside the EU.
Claims for people living in Cyprus, France, Gibraltar, Greece, Malta, Portugal, and Spain are no longer allowed, even if you got one there in the past. They were paid up to winter 2014/15.
The seven countries were chosen because the average temperature of the whole country in the months November to March were warmer than the average temperature in the warmest region of the UK - South West England where it is 5.6C. However, the Department for Work and Pensions calculated the average temperature for France including its four tropical overseas territories - Martinique and Guadeloupe in the Caribbean, French Guiana on the equatorial coast of South America and Réunion which is south of the Equator in the Indian Ocean tropics. Mean winter temperatures in these places range from 20.5C to 25.8C. If they had been excluded the average temperature in France would have been 4.9C, which is below the cut off point for the payment. But including the four territories raises the average to 7.0C thus enabling the Government to exclude tens of thousands of expats living anywhere in mainland France. In fact only six regions in mainland France have a mean winter temperature higher than that in SW England. The DWP claims it had no choice about including the overseas territories. It had to use the definition of France which the French government uses which includes them.
A Met Office report on temperatures in 34 European countries by region contains the data and will enable the new law to be applied if other countries such as Turkey join the EU. No other country in the 34 would be excluded.
Find out more about winter fuel payment and how to claim. People living abroad will normally have to make a claim. And so do men in the UK aged under 65 in the first year they qualify. If you want to get advice call +44 191 218 7777 if you live abroad. If you live in the UK call 03459 15 15 15.
If you do not qualify this year find your qualifying date in future here - assuming the rules do not change which they might.
18 May 2015
Tuesday, 24 July 2012
And it would be ridiculous to pay small amounts by card or cheque.
And hang on again, you add. Rather than lecture us about this small-time tax dodging the Government should be tackling the major tax evoidance (as I call it) of thepeople who think they are too rich or too clever or too famous to pay tax like the rest of us
. Only then will people on modest income struggling to make a living or to pay for essential repairs feel it is right to pay the full whack– and their taxes. Fairness goes both ways.