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less than £17,000 a year will lose all of their working tax credit unless they increase their hours because it will be withdrawn from those working less than 24 hours a week.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.
- 1 Malaysian cyclist could face disciplinary action after 'Save Gaza' gloves protest
- 2 Is Gideon Levy the most hated man in Israel or just the most heroic?
- 3 Fifty Shades of Grey trailer provokes moral outrage from US parenting groups
- 4 McDonald’s removes chicken nuggets from the menu in Hong Kong amid major food scare
- 5 Students offered grants if they tweet pro-Israeli propaganda
Malaysia Airlines MH17 crash: Vladimir Putin is given 'one last chance' to end hostilities in Ukraine
The 'scroungers’ fight back: The welfare claimants battling to alter stereotypes
The truth about conspiracy theories is that some require considering
Arizona execution lasts two hours as killer Joseph Wood left 'snorting and gasping' for air
Malaysia Airlines MH17 crash: Ukrainian military jet was flying close to passenger plane before it was shot down, says Russian officer
Malaysia Airlines MH17 crash: Massive rise in sale of British arms to Russia
iJobs Money & Business
£600 - £650 per day: Orgtel: Conduct Risk Liaison Manager - Banking - London -...
£18000 - £23000 per annum + Comission: SThree: SThree, International Recruitme...
£280 - £300 per day + competitive: Orgtel: Test Analyst, Edinburgh, Credit Ris...
£20000 - £25000 per annum + OTE £40,000: SThree: SThree Group have been well e...
Day In a Page
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
Chapel House is a former vicarage with nine bedrooms in the beautiful Upper Wye Valley
A five-bedroom B&B and separate owner's accomodation with potential for conversion
Enjoy summer by the Thames in this two double-bedroom converted warehouse in Rotherhithe village
A one-bedroom, luxury apartment with private gym and concierge service in Moorgate
A four-bedroom house in Hermitage Gardens with three reception rooms and landscaped gardens
A seven-bedroom Grade II-listed property with a separate self-contained apartment
A five-bedroom Victorian house with three reception rooms and galleried landing, £695,000
A six-bedroom farmhouse with five acres of land in a former cloth-making village
A secluded seven-bedroom detached house with large private garden, £490,000
A three-bedroom cottage overlooking Sarratt village green with open fires and solid oak floors
A three-bedroom maisonette flat in a Grade I-listed, Georgian townhouse in a sought-after location
A one-bedroom apartment located within a private gated development, north of Turnham Green
Look forward to a brighter future at two-bedroom Sunny Cottages, ideal for Londoners looking to downsize
A three-bedroom red-brick cottage with outbuildings and pretty gardens, £200,000
This three-bedroom flat within a former textile factory spans the corner of the fourth floor and has a balcony
A charming four-bedroom Oxfordshire cottage with oak floors and chunky-beamed ceilings, £465,000
A beautiful one-bed flat in a sought-after portered block, with access to Norland Square communal gardens
A one-bedroom flat within a Sixties school conversion with high-spec design and open-plan kitchen, close to Lambeth North Tube, £435,000
A 17th century four-bedroom house, with open fireplaces, cellar and pool, £600,000
A three-bedroom, coach house with luxury open-plan living space and contemporary breakfast bar