Family Tax Credit

From what I have heard it doesn't !

What was wrong with taxable child benefit ?

We have many sources of information - however maintenance is not income for tax credit purposes.

It is not without faults but works generally ok - when was Child Benefit taxable ?

I havent heard that from anyone who claims it

I dont believe it ever was - but it would have been a better system IMO that tax credits.

You tell them. They may then correlate it with what you've already told told them via your tax return, or your employer has told them via their year end returns etc.

It doesn't count. Maintenance payments are disregarded which provides couples with an excellent financial incentive to split up.

They are, but not for the reason you think.

A long time ago family allowance was not taxable. Then it was increased considerably and the extra clawed back through the income tax coding. Eventually both child allowances and marriage allowance were phased out.

...and the extra clawed back through the income tax coding. I know. The amount of people who came into the office who could not grasp it -

" .. the allowance is due at 20% - you are liable at 25 % - we have to recover the 5%".

"..but you are giving it with one hand and taking it with the other"

" **** off"

What would be a better system ?

Taxable child benefit.

How can taxing a benefit replace tax credits ? Are you saying as a tax allowance - in which case it will not work.

I'm saying that you give a benefit and then you tax it. So to a non or low rate tax payer it ends up being worth more than to a high rate tax payer.

Isn't that called Child Tax Credit. The chancellor gives in one hand and takes in the other.

The simplest system would be to give everyone a wodge of money, ie the basic Tax Credit amounts and for the employer to collect the "tax" in PAYE. The only problem is that people might notice that the effective tax rate will be

70% for low to middle income earners. (Made up of 37% claw back of Tax Credits, 22% income tax and 11% NI)

No - never involve employers and tax credits. They should stay separate.

Why ?

Surely the simplest thing is to adjust the tax code and let employers sort it out, whilst also making the benefits system taxable and use the same tax code. so that people on benefits part of the year have the systems integrated.

Yeah - keep them out of income tax too. Abolish PAYE and pay it by DD.

Whenever anyone gets a pay rise, does a bit of overtime, loses their job, or reduces their hours they need to phone HMRC and tell them. That makes things so much easier.

Intergrated?? You jest, surely? You mean you'd only have to tell HMRC your income once?? You'd only need to fill in one form??

Surely you realise it is much more efficient for income tax and tax credits, run by the same government department, to be kept completely separate, with slightly different definitions of income, with one based on individual circumstances and one on family circumstances, one administered via the employer, the other directly with the claimant?

It would help if you explained why.

The most efficient benefit is child benefit. Why? Because it's not means tested and easily administered. Why not the same for Tax Credits? All the employer needs is a tax code to deduct the correct tax / reduction of Tax Credits and you have a far more efficient system without any likelihood of overpayment.

How can you not means test tax credits ?

By "taxing" employees under PAYE and getting all the Tax Credits back if the income is over certain thresholds.

In essence it becomes means tested through increased "tax".