What do we make of the proposed child benefit adjustment?

[cairo]

You're right the discrepancy between families with one earner on 40% and two earners just under 40%, is unfair. The govt is aware of it, but currently has no proposals to amend the change as it would be too complicated / costly to means test everyone. So they are going down the easier / cheaper route of making the decision based on PAYE records.

However, for those who are just over the higher rate threshold, there are steps you can take to ensure you remain within the lower rate band:-

1. Pay more money into your pension. The gross amount of any money put into a pension, reduces your taxable income as assessed by HMRC. So if you were, say, paying 40% tax on £5k of your income, you could put £3k into your pension, the govt would top it up by £2k (making £5k) and you would thus be back in the lower rate bracket.

If people find that unpalatable, you could:

2. Give it to charity under the Gift Aid scheme. Works the same way: you get tax relief, which reduces your taxable income.

You'd probably want to speak to HMRC so they could adjust your PAYE records during the year, rather than waiting till the end of the year to get it all adjusted.

[Waiting_For_Godot]

We give a lot of money to charity via the method above. It does nothing for our tax rate but it means I give less to the charity but the charity doesn't feel it and it frees up more money to give to another charity. I'd rather some of my money went to charities than the government.

[2childmum]

Does anybody know what will happen about the protected pension - where my pension is protected because I am at home caring for my children? It goes to the person who claims child benefit but I will lose what is my only personal income because my husband pays higher rate tax. If I lose the protected pension then I will not only lose money now but for potentially 20+ years when I'm of retiring age, (although the way that is going I will be dead before I reach that age!)

[cairo]

We give a lot of money to charity via the method above. It does nothing for our tax rate .

I was referring to higher-rate taxpayers, who do have their tax bills reduced by giving money via the Gift Aid scheme. It makes no difference to basic rate taxpayers, but higher-rate ones can reclaim the difference between 20% and 40/50% back each year, via their self-assessment forms or a specific form requesting reimbursement if self-assessment is not done. http://www.hmrc.gov.uk/individuals/giving/gift-aid.htm" onclick="window.open(this.href);return false;

Does anybody know what will happen about the protected pension - where my pension is protected because I am at home caring for my children? It goes to the person who claims child benefit but I will lose what is my only personal income because my husband pays higher rate tax. If I lose the protected pension then I will not only lose money now but for potentially 20+ years when I'm of retiring age, (although the way that is going I will be dead before I reach that age!)

Lots of people are worried about this. I would be amazed if the govt doubly provoked the ire of SAHMs by taking away their pension protection as well as their child benefit! I'm sure they'll find a way to allow SAHMs to keep it. Mind you, you only get it until littlest is 12 now, not 16 as it used to be.

[Waiting_For_Godot]

No, I meant we don't give enough to lower our tax rate. OH has a system where is is taken of at the PAYE stage and then his salary is taxed. I doubt we could claim back as well.