Child Benefit Cuts

[kaiser78]

As a contractor with 'typical' ltd company set up ie split dividends with wife, minimum salary etc, I have been trying to find out how the new child benefit £50k ceiling changes will affect me.

Can someone please advise if the such a ltd co/director set up will be unaffected ?

[northernladuk]

As a contractor with 'typical' ltd company set up ie split dividends with wife, minimum salary etc, I have been trying to find out how the new child benefit £50k ceiling changes will affect me.

Can someone please advise if the such a ltd co/director set up will be unaffected ?

Erm....

Child Benefit Changes: Does this affect contractors? :: Contractor UK



Wouldn't say income splitting is a standard setup either but lets leave that one lol

[northernladuk]

and specifically...

The rules come into force as from 7 January 2013, and the taxman will charge individual taxpayers who have a net income over £50,000 in a tax year, where either they, or their partner, is in receipt of Child Benefit for the year. If both partners – whether married or not, or living together or not - have adjusted net income over £50,000, the partner with the higher income will be liable for the tax charge.

[kaiser78]

Erm....

Child Benefit Changes: Does this affect contractors? :: Contractor UK



Wouldn't say income splitting is a standard setup either but lets leave that one lol

One link relates to net income £50k, the other relates to gross income £50k Mr Smug !

Income splitting not standard setup ? I am surprised at that but will leave that one.

[northernladuk]

One link relates to net income £50k, the other relates to gross income £50k Mr Smug !

Income splitting not standard setup ? I am surprised at that but will leave that one.

A few clicks gets you to...

http://www.hmrc.gov.uk/childbenefitcharge/

which also leads you to

https://www.gov.uk/child-benefit-tax-calculator

And a few clicks in to that you see...

Enter your total annual income before tax is taken off.
Only enter the highest individual income if you’re looking after children with a partner.

Include:

salary (before any pension contributions are taken away)
company benefits you get (eg car, fuel and medical benefits)
profits if you’re self-employed
interest you get from savings (including any tax that’s already been paid on it)
State Pension payments and other State benefits that are taxed
payments from personal and occupational pensions or annuities
income from dividends (including the dividend tax credit) or trusts
rental income
Don’t include:

interest you get from tax-free savings, like interest from an Individual Savings Account (ISA)

and you can follow the rest of the steps to find out what the score is.

Mr Smug mode re-activated.

[Martin at NixonWilliams]

As a contractor with 'typical' ltd company set up ie split dividends with wife, minimum salary etc, I have been trying to find out how the new child benefit £50k ceiling changes will affect me.

Can someone please advise if the such a ltd co/director set up will be unaffected ?

Hi Kaiser78,

It is impossible to say whether you are affected without knowing your circumstances. However, the rules are quite straightforward - If you or your parter have adjusted net income of over £50,000 then the short answer is yes, one of you will be affected.

The good thing about this for contractors is that you have complete control over the income you receive - this allows you to cap your adjusted net income at £50,000 should you wish to.

Note that if you anticipate having adjusted net income of over £60,000 each year, then it will not be worthwhile receiving the benefit as you lose 1% for each £100 in excess of £50,000 - you would simply repay the whole amount if this were the case.

I hope this helps.

Martin

[psychocandy]

Hi Kaiser78,

It is impossible to say whether you are affected without knowing your circumstances. However, the rules are quite straightforward - If you or your parter have adjusted net income of over £50,000 then the short answer is yes, one of you will be affected.

The good thing about this for contractors is that you have complete control over the income you receive - this allows you to cap your adjusted net income at £50,000 should you wish to.

Note that if you anticipate having adjusted net income of over £60,000 each year, then it will not be worthwhile receiving the benefit as you lose 1% for each £100 in excess of £50,000 - you would simply repay the whole amount if this were the case.

I hope this helps.

Martin

Not checked out the links but is it net and not gross income over £50K? dunno why but I thought it was gross.

Hmmm. Easy enough to do if you income split usually. Unless you really need the money.

Personally, I try not to go over the £42K anyway.

Wouldn't like to be a permie who just gets a payrise taking them over the limit. Might not be worth having the payrise.

[Martin at NixonWilliams]

Not checked out the links but is it net and not gross income over £50K? dunno why but I thought it was gross.

Hmmm. Easy enough to do if you income split usually. Unless you really need the money.

Personally, I try not to go over the £42K anyway.

Wouldn't like to be a permie who just gets a payrise taking them over the limit. Might not be worth having the payrise.

Hi Psychocandy,

You are correct in saying that it is your gross income that is considered. The term 'adjusted net income' is generally your total taxable income less certain reliefs (typically charity donations and pension contributions, though there are a few more).

A payrise taking you above £50,000 might be slightly more taxing - but it's still worthwhile having

Martin

[psychocandy]

Good point martin. Read the links and its a graduated loss of benefit from 50K to 60K. Seems to make sense.

Otherwise, it would not be cool, if you lost £1000+ worth of child benefit if your income went into £50,001 or something.

Still - no intention of losing out on it anyway :-)

[formant]

Good point martin. Read the links and its a graduated loss of benefit from 50K to 60K. Seems to make sense.

Considering the administrative cost and effort of this implementation, I wouldn't say anything in this 'makes sense'.

I do wonder how they're going to administer this in cases where there's more tied to the child benefit than just those relatively small sums of money. I mean, you're only eligible to claim through the CSA for maintenance if you also get the child benefit for the child/children you want to claim for. This could put particularly dads in shared residence situations into losing much more than 20 quid a week. But that's only if they take the entitlement away on the grounds of your income, not if you get to keep your theoretical entitlement but then have to pay back the funds received at the end of the year. The latter, while still frustrating would be a lot less devastating.