Poorer families face £3,000 tax bombshell
According to the Resolution Foundation, the impact will be greater on lower-income households
Andrew Grice has been Political Editor of The Independent since 1998. He was previously Political Editor of The Sunday Times, where he worked for 10 years, and he has been a Westminster-based journalist since 1982. His column, Inside Politics, appears in The Independent each Saturday.
Thursday 05 April 2012
Families with children will be an average of £511 a year worse off from tomorrow despite the Government's trumpeted rise in personal tax allowances.
New research by the independent Institute for Fiscal Studies (IFS) suggests the gain from the Liberal Democrats' flagship policy of raising the amount of tax-free income could be outweighed for almost one million families by cuts to tax credits.
Ministers are braced for a possible backlash among low-income families as the top-ups to their wages from tax credits disappear.
Labour seized on the IFS estimate as a "tax credits bombshell". The Opposition has obtained new Government estimates through parliamentary questions showing that more than 850,000 families will lose all their child tax credit from the start of the new financial year tomorrow.
And up to 212,000 working couples earning less than £17,000 a year will lose all of their working tax credit unless they increase their hours because it will be withdrawn from those working less than 24 hours a week.
The Resolution Foundation think tank branded tomorrow "Black Friday" after finding that thousands of working families will lose up to a quarter of their household income. A young couple working 23 hours a week with one child and a household income of £15,500 currently receive almost £6,000 in tax credits.
Their overall annual income will fall by £2,961 – about 19 per cent – even after the personal tax allowance rise is taken into account. According to the foundation, the impact is even greater for lower- income households because they have more working tax credits to lose.
Gavin Kelly, its chief executive, said: ''Those working under 24 hours a week face the most brutal cuts... if they cannot find extra hours – a real problem given rising under-employment. These huge losses in income will push some families back on to benefits."
Ed Balls, shadow Chancellor, said the gain in real terms from the income tax allowance rise – £42 a year or 81p a week – was outweighed by the child benefit freeze alone, which cost a family with one child £59.80 a year.
Labour leader Ed Miliband said the Government had given up the right to talk about "us all being in it together" as a result of the Budget. "Whatever twists or turns or justifications you offer you can't lower taxes for millionaires while raising taxes for millions of other people and say, by the way, we're all in this together," he told The Independent. "The Government was right to talk about it but the trouble is they've completely failed as a result of their deeds," he said.
Chloe Smith, the Treasury Economic Secretary, said: "The Government's actions mean that from the beginning of the new tax year, 24 million households will be £6.50 a week better off. We're taking millions out of tax altogether by raising the personal allowance, which will put up to £126 cash back in people's pockets. The need to tackle the huge deficit means we have had to take tough decisions, such as on tax credits. But we've taken those decisions in the fairest way possible, meaning more than 15 times as many people gain rather than lose from this week's changes."
A spokesman for Nick Clegg said that when the Coalition's £10,000 goal for the tax-free personal allowance is reached, low and middle earners would be £700 a year better off.
Independent Partners; request a free guide on NISAs from Hargreaves Lansdown
Customers paying up to £250 more on energy bills than they should every year
Buyers beware of new-build home headaches
Scottish Power hit with sales ban by regulator
Phoenix Life: Chance of a refund for overcharged policyholders has risen
There are 'dark corners' of the investment and pensions industry, says Pension Minister
- 1 What happens to your body when you give up sugar?
- 2 Drugs Live cannabis trial: Hash is less harmful than any other drug, expert claims
- 3 Turkish Airlines flight TK 726 crash-lands on Nepal runway amid dense fog
- 4 Penis size: Study revealing 'what's normal' sends international media into meltdown
- 5 Have sex with your iPad thanks to the new sex toy no-one asked for
Nearly 100,000 of Britain's poorest children go hungry after parents' benefits are cut
Durham Free School: 'Creationism taught at' free school facing closure
Ukip would cut billions from Scottish budget to fund English tax cuts
End of the licence fee: BBC to back radical overhaul of how it is funded
Ukraine crisis: Top Chinese diplomat backs Putin and says West should 'abandon zero-sum mentality'
Boris Nemtsov shot dead: Outspoken Putin critic who had expressed fears for his life is killed near the Kremlin
iJobs Money & Business
£25000 - £30000 per annum + benefits: Ashdown Group: A global leader operating...
Voluntary post, reasonable expenses reimbursed: Reach Volunteering: Would you ...
£36,000 - £40,000: Christine McCleave: Are you looking for a new opportunity a...
£15000 - £18000 per annum: Recruitment Genius: This is a great opportunity for...
Day In a Page
This six-bedroom Georgian home is on three floors with open fireplaces, a two-oven Aga, an annexe, and cottage gardens with outbuildings and a car barn
High Crest House covers an impressive 9384sq ft, with almost three acres of grounds including a tennis court and summer house enclosed by electric gates
A six-bedroom farmhouse with separate accommodation in converted stables. Situated in the village of Church Aston, within walking distance to the market town
A two-bedroom flat with under-heated walnut floors and bespoke built-in storage. The Tube and Clapham Common are a short stroll away
A refurbished seven-bedroom townhouse with staff quarters, cinema room, superb gym, steam room and plunge pool
A minimnalist four-bedroom home designed to the highest spec, featuring glass walls and a kitchen space lit by a glass roof
Hibernate during winter and make your living during the summer at this busy guesthouse with panoramic sea views, in the village of Lynton
A four-bedroom penthouse next to the Tate with direct views of St Paul's from two floors of luxurious living space
A four-bedroom detached home surrounded by spacious gardens and woodland, close to New Pudsey
An 18th-century, three-bedroom home near Langstone Harbour built from ships beams with vaulted ceilings and wood burning stoves
A five-bedroom semi-detached home with a mix of period and modern features in a popular and convenient location
This five-bedroom red-brick beauty overlooks the village green and sits in just under two acres of land
A three-bedroom villa with self-contained flat, minutes from Lake Windermere
A deceptively spacious, beautifully presented Georgian home with 3000sq ft of living space and five reception rooms
A five-bedroom Victorian home with four receptions, superb gardens and paddock in Pembury
An eight-bedroom house on the south side of the The Green with cinema, wine cellars and summer house
This 17th century beauty is full of rustic cosiness, while the detached home office means you can also run a business
Four exclusive apartments in a Grade II-listed former medical school with 2,275 sq ft of living space and 18ft ceilings
A five-bedroom terraced house on the popular Peterborough Estate, ideally located for both Eel Brook Common and South Park
A state-of-the-art farm-building conversion on the former Cliveden Estate, with 11,420sq ft of internal space, cinema and wine cellar
A three-bedroom, 15th-century cottage with original features in the picturesque village of Sissinghurst
A six-bedroom terraced house with large south-facing roof terrace, cinema room and wine cellar
A new seven-bedroom home built in Queen Anne-style with swimming pool and parkland views in Mortimer
A listed, four-bedroom farmhouse in the rural hamlet of Rushall with detached barn, four acres of gardens and paddocks
A first-floor flat with two bedrooms, a spacious reception room and communal grounds in a leafy part of London
A three-bedroom flat with a spacious rootop terrace and balcony, accessed from a private gated courtyard
A Grade II-listed pile with six bedrooms, stables and 39 acres of grounds in Standlake
A two-bedroom flat with boutique hotel-style interiors, close to the foodie haunt of West End Lane
A two-bedroom flat in a beautiful old vicarage, with many original features, close to the city centre
A three-bedroom 16th-century home with an aga kitchen, private gardens and heated outdoor pool, in Hadleigh
A three-bedrom home in sought-after Queen's Gate Mews, with Italian marble-finished bathrooms
Surrounded by glorious countryside in the village of Udimore, sits this impressive four-kiln oast and barn conversion
A five-bedroom house in the picturesque village of Kettlewell, north Yorkshire
An 18th-century former coaching inn with original staircase, open fireplaces and beams throughout
A Grade II-listed Georgian town house with three bedrooms and a south-facing courtyard, near Arundel Castle
Feel on top of the world at this über chic penthouse on the 37th floor of one of Europe’s tallest blocks.
A Grade II-listed Victorian villa with six bedrooms and two further cottages, all with spectacular sea views
A grade II-listed, Georgian cottage with mature 50ft garden, perfect for summer entertaining
A magnificent Georgian pile with turrets, seven bedrooms, a heated pool and four acres of gardens
Fairoak Farm has five bedroom suites, gym, outdoor swimming pool and golf course
Chic two-bedroom river-fronted flat with a private lift that delivers you directly to your home
A spectacular seven-bedroom Tudor pile, once owned by Henry VIII, with 18 acres of land
A seven-bedroom Georgian property previously used as a picturesque wedding venue
A split-level flat in a church conversion with two en suite bedrooms and 1,200sq ft of living space
A three-bedroom bungalow situated behind an impressive stone wall, £645,000
Windsor Castle overlooks this three-bedroom Victorian cottage located on one of Windsor's smartest roads