Poorer families face £3,000 tax bombshell

According to the Resolution Foundation, the impact will be greater on lower-income households

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less than £17,000 a year will lose all of their working tax credit unless they increase their hours because it will be withdrawn from those working less than 24 hours a week.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.

Suggested Topics
News
A 1930 image of the Karl Albrecht Spiritousen and Lebensmittel shop, Essen. The shop was opened by Karl and Theo Albrecht’s mother; the brothers later founded Aldi
people
Arts and Entertainment
Flora Spencer-Longhurst as Lavinia, William Houston as Titus Andronicus and Dyfan Dwyfor as Lucius
theatreThe Shakespeare play that proved too much for more than 100 people
News
exclusivePunk icon Viv Albertine on Sid Vicious, complacent white men, and why free love led to rape
Arts and Entertainment
Standing the test of time: Michael J Fox and Christopher Lloyd in 'Back to the Future'
filmA cult movie event aims to immerse audiences of 80,000 in ‘Back to the Future’. But has it lost its magic?
PROMOTED VIDEO
Have you tried new the Independent Digital Edition apps?
Arts and Entertainment
Stir crazy: Noel Fielding in 'Luxury Comedy 2: Tales from Painted Hawaii'
comedyAs ‘Luxury Comedy’ returns, Noel Fielding on why mainstream success scares him and what the future holds for 'The Boosh'
Life and Style
Flow chart: Karl Landsteiner discovered blood types in 1900, yet scientists have still not come up with an explanation for their existence
lifeAll of us have one. Yet even now, it’s a matter of debate what they’re for
Arts and Entertainment
'Weird Al' Yankovic, or Alfred Matthew, at the 2014 Los Angeles Film Festival Screening of
musicHis latest video is an ode to good grammar. But what do our experts think he’s missed out?
Sport
Colombia's James Rodriguez celebrates one of his goals during the FIFA World Cup 2014 round of 16 match between Colombia and Uruguay at the Estadio do Maracana in Rio de Janeiro, Brazil
sportColombian World Cup star completes £63m move to Spain
Arts and Entertainment
booksThe best children's books for this summer
Life and Style
News to me: family events were recorded in the personal columns
techFamily events used to be marked in the personal columns. But now Facebook has usurped that
News
news
News
i100
Travel
Fair trade: the idea of honesty boxes relies on people paying their way
travelIt seems fraught with financial risk, but the policy has its benefits
News
people
Sport
Antoine Griezmann has started two of France’s four games so far
sport
Life and Style
Child's play: letting young people roam outdoors directly contradicts the current climate
lifeHow much independence should children have?
Arts and Entertainment
Tycoons' text: Warren Buffett and Bill Gates both cite John Brookes' 'Business Adventures' as their favourite book
booksFind out why America's richest men are reading John Brookes
Finacial products from our partners
Property search
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Programme Director - Conduct Risk - London

    £850 - £950 per day: Orgtel: Programme Director - Conduct Risk - Banking - £85...

    Business Analyst (Agile, SDLC, software)

    £45000 - £50000 Per Annum + excellent benefits: Clearwater People Solutions Lt...

    Finance Manager - Bank - Leeds - £300/day

    £250 - £300 per day + competitive: Orgtel: Finance Manager - Accountant - Bank...

    Compliance Officer - CF10, CF11, Compliance Oversight, AML, FX

    £100000 - £120000 per annum + BONUS + BENEFITS: Harrington Starr: A leading fi...

    Day In a Page

    Noel Fielding's 'Luxury Comedy': A land of the outright bizarre

    Noel Fielding's 'Luxury Comedy'

    A land of the outright bizarre
    What are the worst 'Word Crimes'?

    What are the worst 'Word Crimes'?

    ‘Weird Al’ Yankovic's latest video is an ode to good grammar. But what do The Independent’s experts think he’s missed out?
    Can Secret Cinema sell 80,000 'Back to the Future' tickets?

    The worst kept secret in cinema

    A cult movie event aims to immerse audiences of 80,000 in ‘Back to the Future’. But has it lost its magic?
    Facebook: The new hatched, matched and dispatched

    The new hatched, matched and dispatched

    Family events used to be marked in the personal columns. But now Facebook has usurped the ‘Births, Deaths and Marriages’ announcements
    Why do we have blood types?

    Are you my type?

    All of us have one but probably never wondered why. Yet even now, a century after blood types were discovered, it’s a matter of debate what they’re for
    Honesty box hotels: You decide how much you pay

    Honesty box hotels

    Five hotels in Paris now allow guests to pay only what they think their stay was worth. It seems fraught with financial risk, but the honesty policy has its benefit
    Some are reformed drug addicts. Some are single mums. All are on benefits. But now these so-called 'scroungers’ are fighting back

    The 'scroungers’ fight back

    The welfare claimants battling to alter stereotypes
    Amazing video shows Nasa 'flame extinguishment experiment' in action

    Fireballs in space

    Amazing video shows Nasa's 'flame extinguishment experiment' in action
    A Bible for billionaires

    A Bible for billionaires

    Find out why America's richest men are reading John Brookes
    Paranoid parenting is on the rise - and our children are suffering because of it

    Paranoid parenting is on the rise

    And our children are suffering because of it
    For sale: Island where the Magna Carta was sealed

    Magna Carta Island goes on sale

    Yours for a cool £4m
    Phone hacking scandal special report: The slide into crime at the 'News of the World'

    The hacker's tale: the slide into crime at the 'News of the World'

    Glenn Mulcaire was jailed for six months for intercepting phone messages. James Hanning tells his story in a new book. This is an extract
    We flinch, but there are degrees of paedophilia

    We flinch, but there are degrees of paedophilia

    Child abusers are not all the same, yet the idea of treating them differently in relation to the severity of their crimes has somehow become controversial
    The truth about conspiracy theories is that some require considering

    The truth about conspiracy theories is that some require considering

    For instance, did Isis kill the Israeli teenagers to trigger a war, asks Patrick Cockburn
    Alistair Carmichael: 'The UK as a whole is greater than the sum of its parts'

    Alistair Carmichael: 'The UK as a whole is greater than the sum of its parts'

    Meet the man who doesn't want to go down in history as the country's last Scottish Secretary