useage of a stay at home mum's tax free allowance

Ah! This is the result of sexual equality. The state of play you prefer was true before the fair sex was deemed to be equal to the ugly sex.

Rob Graham

No, it's right that you should be shafted. You have contributed to the population explosion that will cause mass starvation within their lifetimes, and possibly within yours too. You have created machines that will consume the world's resources and pollute for the next 80 years. And you want a reward?

You get free health care for all of them. You get free education for all of them. And still you want more?

Then the proper course of action would be to shaft them to an even greater extent.

Yes of course there is. Give her all your money.

Yup - it's my favourite whinge. Most people seem to be too thick to understand how hypocritical it is to assess people for tax as individuals but for benefits (and tax credits) as a couple. So the government get away with it - it gets them more tax and costs them less in benefits. The Tories were on about transferable tax allowances for married couples, but with the massive debt they'll inherit I doubt it'll be a priority.

What you can do about it now - a few possibilities.

If you're employed you can't use your wife's allowance against your employment income, but if you're self employed you might be able to employ your wife to do admin work etc.

If you're going to have more kids, you could employ your wife in a domestic capacity (to cook your dinner, iron shirts etc) paying her an amount just above the NI LEL but below the NI PT (about 100 a week). It won't reduce your tax, but she'd be entitled to maternity pay which you'd pay her and get off the state. She wouldn't pay any NI, or tax if it's her only income.

If you've got savings which generate taxable income (interest/dividends) put them in your wife's name. Though for most people this'll only use up a tiny amount of her allowance.

You can take the piss out of the tax credits system - you can effectively get up to 98% tax relief on pension contributions depending on your income and number of kids, plus get lots of perks like free prescriptions and get a Warm Front grant to get your house insulated, cavity wall, new boiler etc.

I've posted about all these here over the last few years, have a look at the archives. And they do work!

And pay more tax towards the free services your child receives. Tell you what, you pay for all your schooling and medical care of your children and I will pay you the old marriage allowance.

How do you arrive at that? A couple with the same total earnings will have 2 personal allowances and two basic rate bands. So I don't see how they can pay more tax on their earnings. (IIRC there used to be a scenario where they could pay more income tax + NICs but that vanished with the ending of the "entry fee" for NICs.)

Some of us would argue the problem dates back to the introduction if independent taxation when we did not adopt the system in several other countries of a choice between (fully) independent taxation or joint taxation with higher allowances etc. One reason was that IR systems could not have coped. (This was before SA.)

Of course the introduction of tax credits means we do now have returns from such families, but there surely ain't the money now to fund a change.

Of course 2 people working should be better off than 1 person working.

I do not disagree that bringing up children is an important job but after the very early years this is only a "part time" activity, the rest of their time being spent carrying out tasks that enhance family life - good for you if that is how you choose to live you life but it is not reasonable for you to expect the tax payer to help fund it. It is also true for the stay at home partner of a couple without children as this is simply a life style choice.

There should therefore entirely reasonable that there is a child related extra tax allowance but it should not blindly follow marriage and it should not disadvantage those who choose to work.

But as others have said, a bit unaffordable just at the moment.

Tell you what, when you retire, you claim no state pension, use no NHS services, and pay back all the debt racked up by the incompetent government this generation elected. Instead of relying on future taxpayers like the OPs children to pay for it. Then you don't have to subsidise their education.

Why? Why should 1 person working 40 hours/week earning 40,000 to support 4 people be worse off than 2 people working 20 hours each earning 20,000 each?

He's not expecting the taxpayer to "fund" it FFS. He's expecting the same tax treatment as if the money earning work was shared with his wife.

You really don't understand the tax system, do you?

You're missing the point altogether. A couple with two earners and children still get all these services, but also pay less tax.

Neb

..

Why should 2 people working 20 hours and earning £20,000 each take home be worse off than 1 person working 40 hours and earning £40,000?

No, he is asking for better tax treatment. What he has at the moment is the same tax treatment.

I take it you are married with no children then? :-)

Erm, they shouldn't. They should take home the same. But the 2 working people take home more because they get to use two allowances.

See above.

Another reason it won't change is that the problem doesn't really affect the very rich.

Interest rates have dropped a bit but until recently you only needed about 100K in savings to be able to use up the tax free band. Even now, the interest on a million in savings is going to make a big dent into the zero and basic rate tax bands of a non-working spouse.

Until the people who have the ear of the chancellor (it doesn't matter which party) are saying "don't you think it's a bit unfair..." then nothing is going to change.

Tim.

Furthermore, it's the government's intention for all to work and create wealth for the country, rather than having a stay-at-home Mum.

Yes, we can't have people looking after their own children, can we?

A lot of people would love to be in the position where they could talk about "only" £100k of savings.

You snipped the bit about "very rich."

I don't know if there is a formal definition but you've only got to look at the news of the various bank failures to see that there are many people with hundreds of thousands of cash savings in one bank.

I remember a radio interview some years ago with the then CEO of British Gas. IIRC he was earning about 600K p/a and he described himself as "well off but not rich." I've no idea if he was married or if his wife worked but assuming he was and assuming she didn't I'm sure he would have had enough cash savings floating around to be able to take advantage of her full basic rate and zero rate allowances on interest payments. (And if not cash then probably shares investments generating dividend income)

My point was that by the time you've got enough assets to be able to generate about 40K of income outside of any employment then individual taxation of husband and wife makes no difference to you at all because you can adjust the bits you can control to take advantage of your available allowances. And the people likely to be invited to give the chancellor advice on tax changes etc are also likely to be the sorts of people who do have that sort of private income.

It's a bit like inheritance tax. If the only asset you've got is your home then it's hard to gift it to your children and continue to live in it. If you've got a few billions worth of real estate then you can give most of it to your children without any problems of whether the gift is really exempt because "just" retaining a few millions worth will be amply sufficient to continue to live in.

Tim.

It's perfectly possible to have several hundred K savings in ISAs, PEPs and pensions.

The Tories were promising transferrable allowances.

Which is utter bullshit when we have a reasonably generous tax credits and benefits system for those without a job.

The effect of that combined with independant taxation is to polarise society into 2-job families and no-job families. That's why for the last 10 years or so the UK has the highest "unemployed household" rate in the EU (ie households with nobody in work), despite having lower unemployment than the EU average.

Any extra wealth just gets pissed away paying benefits to those for whom there's no incentive to work, or who can't find a job because so many "stay at home Mums" have been forced or tempted out to work, because of the way single earner families get screwed.

Which reminds me of another "loophole" I posted about a while ago. Or rather an example of how brain dead this government are. They are so obsessed with people "working", rather than looking after their own children, that there are big subsidies for childcare through the tax system and tax credit system. A childminder is as valid a job as any other job, so looking after other peoples' children is "work" which should be encouraged but looking after your own children is a "lifestyle choice" which should be penalised by independant taxation.

Two stay-at-home mums could register as childminders, swap children, and both end up much better off financially. Because then they they are then "working" and paying for "childcare" while they do so. Of course, if these mums are neighbours, they could always visit the "childminder" next door and let the children play together.

I don't see how this wheeze would actually have them financially better off. The two mums would be in full time employment, or more likely self-employment, and the dads would be paying for it. The mums' income would be taxed, so overall they would lose out because tax is being leaked out of the system which wouldn't be the case if the mums looked after their own children instead of each other's. In addition there would be compliance costs in connection with being licensed to child-mind.

I appreciate that the tax credits and childcare voucher systems would go some way towards alleviating this funding leak, and I don't know enough about them to tell just how much they would help, but I find it difficult to imagine there actually being a profit in it. Could you go into the details a bit?