Lee "Budgie" Barnett (budgie_uk) wrote,
Lee "Budgie" Barnett

Someone's being stupid

Someone's being stupid.

Fair enough, I know that's like saying someone's breathing. Someone's always being stupid at any point in time.

Thing is, it may be me this time. I'm not sure but it could be.

The subject? The proposed child benefit rule changes that are supposed to be coming in from April 2013.

If you've not heard of them, this is what they say, simplistically:

Whereas at the moment, it's a universal benefit (if you have children, you get paid it, if you don't, you don't, and it's always paid to the woman) from 2013, the following will apply:

(1) Households where at least one person is a higher-rate taxpayer, i.e. earns £43,875 will lose the benefit

(2) Households where both parents earn £43,500 (totalling £87,000) will keep their entitlement to the benefit

This has been well-publicised and is a well-acknowledged anomaly.

However, and here's where I'm may be about to be incredibly stupid... isn't this just an extension of an already existing anomaly in which it's individuals that are looked at for taxation?

Take that two households where the total income is that £87,000.

In the first, the man (it's usually the man, let's be fair) earns £87,000 and his wife/partner etc doesn't work.

He'll get his personal allowance of £6,5001 upon which he doesn't pay any tax, which leaves £80,500 upon which to pay tax. On the first £37,400 of that, he'll pay 20%, or £7,480. On the remaining £43,100 he pays 40% or £17,240. Total income tax: £24,720, an average rate of 28% of all household income.

Now take the same household, but this time both parents earn £43,500, again totalling £87,000. Both get their personal allowance, leaving £37,000 each on which to pay tax. At 20%, that's £7,400 each or £14,800 in total, an average rate of 17% on all household income.

Same total income, wildly different total tax paid.

And yet, I see no great protests about this.

As far as I can see? The anomaly created by Osborne is merely a continuation of treating taxation as individually based and benefits as household based, and the suggestion that child benefit should straddle the two.

Or am I just being stupid?

1 Yes, the actual Personal Allowance this year is £6,475 not £6,500; I left it at £6,500 for simplicity's sake, and yes the personal allowance is being restricted for higher rate tax payers from this year onwards but that just makes the higher rate tax payer even more disadvantaged. But it also makes the calculations more complicated and I wanted to keep it as simple as possible.

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