Sunak charges 65% income tax in new shock – ‘unfair levy must be axed NOW’

Martin Lewis explains who is eligible for Child Benefit

We use your sign-up to provide content in ways you’ve consented to and to improve our understanding of you. This may include adverts from us and 3rd parties based on our understanding. You can unsubscribe at any time. More info

Now tax experts are demanding this sneaky levy is axed, yet so far there has been no response from the Treasury. The UK’s complex tax system is riddled with unfairness and one of the cruellest quirks sees some families paying an effective 65 percent tax rate on their income.

Once one parent makes £60,000 or more, they have to repay all of the child benefit.

This is known as the higher income child benefit tax charge (HICB), a stealth tax introduced by former Chancellor George Osborne in 2013.

This affects hundreds of thousands of parents who are receiving child benefit, and may already be struggling due to the cost of living crisis.

Child benefit is paid to parents who are responsible for bringing up a child who is either under 16, or under 20 if in approved education or training.

It is worth £21.80 a week for the first child, and £14.45 a week for any subsequent children.

Although it is not means tested, if one earner in a family makes more than £50,000 a year, they must pay back one percent of the child benefit they receive for every £100 of income over that threshold.

The HICB already affects around 630,000 families a year, who handed £416 million to HMRC in the 2019/20 tax year, that’s £660 each on average.

Yet it is unfair in a number of ways. First, that £50,000 threshold has not increased in nine years, while the average weekly wage has climbed 29 per cent, dragging more parents into the net every year.

The levy also comes down hard on families with only one breadwinner. They will incur the HICB the moment their income passes £50,000, yet a couple who both earned, say, £40,000 each, would escape despite earning £80,000 in total.

The HICB is also complicated. Someone earning above £50,000 but below £60,000 will claim their child benefit in the usual way, then complete a self-assessment tax return to hand back a chunk of the money to HM Revenue & Customs.

It is hardly surprising that some simply do not bother claiming child benefit at all.

There are growing calls for an overhaul, with financial advisers manager Quilter calling the charge “perverse”.

Pensions expert Ian Browne said that because the threshold for paying 40 percent tax is slightly higher than the HICB at £50,270, many basic rate taxpayers get caught out.

He called on the Government to increase the HICB charge in line with the higher rate income tax threshold. “It is perverse that basic rate taxpayers are being caught out by a charge that is not designed for them.”

Incredibly, a couple with three children where one partner earns £54,000 will pay 65 percent tax on income above £50,000.

DON’T MISS:
Sadio Mane shows he’s a class act after Liverpool lose to Real Madrid [REVEAL]
Jubilee row explodes as Harry and Meghan told they are ‘NOT welcome’ [LATEST]
‘Has a duty to herself’ Angela Levin in fresh attack on Meghan [ANALYSIS]

The HICB would cost them £1,054 in lost child benefit, with 20 percent income tax on the first £270 they earn above £50,000 adding £54, while 40 percent tax on the remaining income adds another £1,492.

In total, they will lose £2,600 of their £4,000 earnings, almost two thirds.

Browne said workers could potentially avoid the HICB charge by making extra pension contributions, which reduces their taxable salary. “They will both increase the amount of child benefit they receive and earn tax relief on their pension contributions.”

Jenny Holt, managing director, customer savings & investments at Standard Life, suggests using the government’s child benefit tax calculator to work out if you are affected.

Holt said if you choose not to take child benefit payments, you should still consider filling in the child benefit claim form. “This helps you get National Insurance credits, which go towards your State Pension later in life.”

Source: Read Full Article