Ooooh, no, this is tax abuse

Congratulations! You’ve had a pay rise, received a bonus or got a new job, taking your earnings above £50,000 for the first time.

The bad news, if you have kids, is that you will now be hit by what some have claimed is a “tax on children”.

But the good news is that there are perfectly legitimate and morally acceptable ways of reducing your liability – most notably, by paying more into your pension.

Ritchie will be upset. Because that’s tax abuse, deliberately changing your actions in order to avoid righteous taxation. Tsk. And in The Guardian, too.

17 thoughts on “Ooooh, no, this is tax abuse”

  1. This is what first triggered my warning bells about the Guardian about ten years ago when the Child Benefit claw-back was introduced and the Guardian – THE GUARDIAN!!!!!! – was full of articles on How To Avoid The New Tax.

    IF YOU’RE ON FIFTY GRAND YOU DON’T NEED THE CHILD BENEFIT!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! YOU’RE RICH!!!!!!!!!!!!!!!!!!!!!!!!!

  2. Geez, HMRC figures shows £50,000 puts you in the top 10%. THESE PEOPLE ARE RICH and are scrabbling for a couple of hundred quid BENEFITS.

    And, yes, of course, the Grun has comments disabled on that article. God, I’m gonna have to write a LETTER.

  3. Pah.

    Many of my clients are director/shareholders.

    If a they can shift income earning assets such as shares with a spouse or partner the pair are able to withdraw up to £92,700 in salary and dividends from a company and stay within the basic rate tax band, so incurring tax of £4,876 and retaining £87,824 net income.

    Most couples can get along on that.

    And still be entitled to child benefit.

    Since the state has no qualms about taking from its citizens as much as it deems fair, I feel it is only fair to play the game to the best benefit for my clients.

    I hope Spud is reading this. Yeah, that’s right, Spud. Over £92k for a couple. Over £87k take home.

  4. Jgh,

    Rich or not, for a family with three children, that raises your marginal income tax rate from 40% to 65%. If I’m earning between 50k and 60k, I’m not going to work an hour of overtime.

  5. Withdrawing benefits at a threshold is stupid, why make the marginal tax rate jump around like that?

    Actually perhaps not stupid, more like dishonest. The honest solution would be, if you want a particular marginal tax rate, to simply set that tax rate. But politically, saying “someone that rich doesn’t need this benefit” is simpler.

  6. The worst thing about it is if for instance, my missus’ penniless ex decides he wants to claim Child benefit for his kids (who live with us), which he is apparently entitled to, I would get hit with the tax charge still…

    That’s tax fairness for you!

  7. Child Benefit is claimable by the primary carer – ie, the carer that the children live (the majority of the the time) with. One of the good things Mrs Castle forced through to stop deadbeat Dads drinking the kids’ money. Your Mr Deadbeat would not be able to claim.

  8. @ MBE
    There is an alternative viewpoint – that Child Benefit is provided to those who need it to help pay for the cost of feeding and clothing kids (when it started there were no extra costs for school and you just didn’t take holidays if you could not afford them). Rich parents didn’t need it and my mother told me that she only started claiming (the ?13s a week) when she learned that my father was paying tax on it whether she did so or not.
    So the extra tax on higher-rate taxpayers is merely a reversion to the original purpose of child benefit.
    I had *no sympathy whatsoever* when Ed Millionaireband described asking his higher-tax-paying barrister mistress to pay a little more tax as “an attack on the squeezed middle” – only for Labour politicians is a household income over £100k part of the “squeezed middle”.
    It is more important to reduce the marginal tax rate on those receiving tax credits (70%) than on those higher rate tax (45% up to 65%).

  9. One notes that the holier-than-thou Grauniad, having said that there are two ways to reduce one’s tax – Gift Aid to a Charity or converting current income into pensions savings – then spends the rest of the article describing only how to convert taxable income into non-taxable pension savings.
    We should all support their fake charities through our taxes or the “National Lottery” or … but they should not their hands in their own pockets to do so.

  10. You guys appear to define rich as high income.

    How do you define wealth?

    I’d have said £50k was high income, would not have suggested they were rich.

  11. @ Martin
    I said “rich parents didn’t need it” because a couple with no – or insignificant – savings and a high income that will not last (e.g.a craftsman construction worker doing massive amounts of overtine to finish a project by the deadline) probably does. My parents weren’t rich but we were middle-class so my mother thought that Child Benefit wasn’t intended for us.

  12. “Rich” is income, “wealth” is assets. As I ranted that being on £50,000 puts you in the top 10% and means you are rich, by the same argument I would have to say that having assets in the top 10% makes you wealthy. That’s a definition I would be happy to use.

    In 2011-12 £500,000 net assets puts you in the top 10%. link

  13. If people think £50k p.a. is rich then they should look to see what house could buy on that salary in the South East.

    “Withdrawing benefits at a threshold is stupid, why make the marginal tax rate jump around like that?”
    Also how much does it cost to administer?

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