Best of the Week
Most Popular
1. Investing in a Bubble Mania Stock Market Trending Towards Financial Crisis 2.0 CRASH! - 9th Sep 21
2.Tech Stocks Bubble Valuations 2000 vs 2021 - 25th Sep 21
3.Stock Market FOMO Going into Crash Season - 8th Oct 21
4.Stock Market FOMO Hits September Brick Wall - Evergrande China's Lehman's Moment - 22nd Sep 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
7.AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
8.Why Silver Price Could Crash by 20%! - 5th Oct 21
9.Powell: Inflation Might Not Be Transitory, After All - 3rd Oct 21
10.Global Stock Markets Topped 60 Days Before the US Stocks Peaked - 23rd Sep 21
Last 7 days
Dow Stock Market Trend Forecast Into Mid 2022 - 4th Dec 21
INVESTING LESSON - Give your Portfolio Some Breathing Space - 4th Dec 21
Don’t Get Yourself Into a Bull Trap With Gold - 4th Dec 21
GOLD HAS LOTS OF POTENTIAL DOWNSIDE - 4th Dec 21
4 Tips To Help You Take Better Care Of Your Personal Finances- 4th Dec 21
What Is A Golden Cross Pattern In Trading? - 4th Dec 21
Bitcoin Price TRIGGER for Accumulating Into Alt Coins for 2022 Price Explosion - Part 2 - 3rd Dec 21
Stock Market Major Turning Point Taking Place - 3rd Dec 21
The Masters of the Universe and Gold - 3rd Dec 21
This simple Stock Market mindset shift could help you make millions - 3rd Dec 21
Will the Glasgow Summit (COP26) Affect Energy Prices? - 3rd Dec 21
Peloton 35% CRASH a Lesson of What Happens When One Over Pays for a Loss Making Growth Stock - 1st Dec 21
Stock Market Sentiment Speaks: I Fear For Retirees For The Next 20 Years - 1st Dec 21 t
Will the Anointed Finanical Experts Get It Wrong Again? - 1st Dec 21
Main Differences Between the UK and Canadian Gaming Markets - 1st Dec 21
Bitcoin Price TRIGGER for Accumulating Into Alt Coins for 2022 Price Explosion - 30th Nov 21
Omicron Covid Wave 4 Impact on Financial Markets - 30th Nov 21
Can You Hear It? That’s the Crowd Booing Gold’s Downturn - 30th Nov 21
Economic and Market Impacts of Omicron Strain Covid 4th Wave - 30th Nov 21
Stock Market Historical Trends Suggest A Strengthening Bullish Trend In December - 30th Nov 21
Crypto Market Analysis: What Trading Will Look Like in 2022 for Novice and Veteran Traders? - 30th Nov 21
Best Stocks for Investing to Profit form the Metaverse and Get Rich - 29th Nov 21
Should You Invest In Real Estate In 2021? - 29th Nov 21
Silver Long-term Trend Analysis - 28th Nov 21
Silver Mining Stocks Fundamentals - 28th Nov 21
Crude Oil Didn’t Like Thanksgiving Turkey This Year - 28th Nov 21
Sheffield First Snow Winter 2021 - Snowballs and Snowmen Fun - 28th Nov 21
Stock Market Investing LESSON - Buying Value - 27th Nov 21
Corsair MP600 NVME M.2 SSD 66% Performance Loss After 6 Months of Use - Benchmark Tests - 27th Nov 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Child Benefit Cut Cliff Edge Tapered, Middle Class Can Continue to Have Babies

Personal_Finance / UK Tax & Budget Mar 21, 2012 - 01:15 PM GMT

By: Nadeem_Walayat

Personal_Finance

Best Financial Markets Analysis ArticleAs widely expected, George Osbourne performed a major u-turn today on the proposed cliff edge Child Benefit cuts that would have seen any family with a higher rate tax payer (Gross income of £42k) have their child benefit scrapped (£2,450 per year for a 3 child family) whilst a family with two joint earners on £41k per annum (total £82k) would have retained their child benefit payments in full.


The change in implementation of Child benefit cuts positively impacts 90% of families that faced the cliff edge cut, where now families with single tax payers earning upto £50k per annum will retain child benefit in full, thereafter child benefit cuts will be tapered by 1% for every £100 earned over £50,000. Therefore an income of £55,000 would result in a 50% cut, and £60,000+ would result in a 100% cut. However this still results in anomalies such as a couple earning £49k each to total £98k would retain their child benefit in full against a single earner family on £60k who would receive no child benefit.

How to Beat Child Benefit Cuts

The only way to beat the child benefit cuts in totality is for gross taxable earnings to be below £50k per earner. The system of tapering for earners upto £60k will result in a cut of 1% for every £100 earned, which means a £10.56 cut for 1 child per £100, 2 children £24.50, 3 children £31.47, 4 children £38.44. and so on at the rate of £6.97 per each additional child per £100 earned.

Some of the options available to maximise child benefit payments are:

Pension - One of the best way to cut ones income is by boosting pension contributions so as to reduce gross taxable income to towards or below £50,000.

Salary Sacrifice - Taxable pay can be cut by sacrificing part of your salary in exchange for extra days off work, company cars or childcare vouchers.

Self Employed - Have a variety of options to ensure that profits during a tax year do not exceed £50k such as buying extra stock, machinery or the scheduling of business income receipts across tax years, or employing ones spouse.

End Discrimination Against Families with Children, and Scrap Child Benefit

At the end of the day child benefit for higher rate tax payers is not a benefit but a tax rebate, they are only getting back some of the money that is being taken via income tax. The same holds true for changes to tax credits that means many basic rate tax paying families are seeing it being scrapped for them. The UK tax system is designed to punish families, and very heavily those with one earner as the child benefit cliff edge illustrates. Instead of taxing individuals the family should be taxed as a single unit, this would at stroke do away with the cliff edge anomaly.

However from an economic point of view, It is far better and cheaper to manage if child benefit were scrapped in totality and the money saved to result in tax cuts. This would save a huge amount of money that is currently being wasted on administering the child benefit system. The government likes to employ people who do nothing more the shuffle paper in administering and managing, monitoring and evaluating systems such as the child benefit system, instead all of these workers could be put to productive use in actually performing work that generates positive economic activity rather than act as a drag on the economy, and it is only then that the economy will actually start to grow! Scrapping many more benefits coupled with cutting taxes would also result in greater incentive to work as workers would be retaining more of every extra pound earned rather than relying on the likes of tax credits and child benefit via expensive administration to give them some of the money back that they have had taken away from them.

The bottom line: Cut government spending, Cut benefits and CUT TAXES and you will see the economy boom.

Source and Comments: http://www.marketoracle.co.uk/Article33729.html

By Nadeem Walayat

http://www.marketoracle.co.uk

Copyright © 2005-2012 Marketoracle.co.uk (Market Oracle Ltd). All rights reserved.

Nadeem Walayat has over 25 years experience of trading derivatives, portfolio management and analysing the financial markets, including one of few who both anticipated and Beat the 1987 Crash. Nadeem's forward looking analysis focuses on UK inflation, economy, interest rates and housing market. He is the author of three ebook's - The Inflation Mega-Trend; The Interest Rate Mega-Trend and The Stocks Stealth Bull Market Update 2011 that can be downloaded for Free.

Stocks Stealth Bull Market Ebook DownloadThe Interest Rate Mega-Trend Ebook DownloadThe Inflation Mega-Trend Ebook Download

Nadeem is the Editor of The Market Oracle, a FREE Daily Financial Markets Analysis & Forecasting online publication that presents in-depth analysis from over 600 experienced analysts on a range of views of the probable direction of the financial markets, thus enabling our readers to arrive at an informed opinion on future market direction. http://www.marketoracle.co.uk

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any trading losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors before engaging in any trading activities.

Nadeem Walayat Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in