Who are the winners out of George Osborne's emergency Budget? Our figures show that a couple earning £25,000 or less with two children have most to be happy about. They will be £17 a month better off as a result of the changes introduced during the current tax year. Also smiling, albeit a little ruefully, will be single people earning £20,000 or less with one child who will get an extra £12 a month.
However, all parents may feel the pain from the freezing of child benefit for three years and the several cutbacks announced in child tax credits, including those not mentioned by Mr Osborne in his main Budget speech.
From next April the picture slightly changes when we look for winners. With the personal allowance rising by £1,000 to £7,475 for those aged under 65 from 2011, you'd expect low-earners to be facing a better income. In fact, Mr Osborne predicted the change will lift as many as 880,000 people out of tax altogether.
Our figures suggest that, indeed, low earners will be the biggest winners. From next April a couple where only one earns an income of £10,000 who have two children are likely to face the biggest boost to their income as a result of the Chancellor's changes; they will end up £79 a month better off. Next in line to gain most will be a couple where both are earning a total of £25,000 with two children; they will be £76 a month better off.
The losers during the current tax year are almost anyone earning £125,000 or more. They will be £216 a month worse off as a result of the Budget changes. The exceptions are pensioner couples aged 73-74 and couples where both earn, irrespective of whether they have children or not. They won't be hit by a cut in income unless they earn £175,000 or more, at which level they will also notice a £216 monthly reduction.
From next April the biggest losers could be the 700,000 people predicted to be paying 40 per cent tax in their income for the first time. From the start of the 2011-12 tax year the higher rate tax band will drop by around £2,500 – although the actual rate is to be set according to this September's RPI figures.
Currently, the 40 per cent tax rate applies to earnings of £37,400. Taking account of the £6,475 personal allowance, it means most people now start paying 40 per cent tax on income above £43,875. Even with the £1,000 increase in the personal allowance from April 2011, the planned cut in the higher rate tax band to around £34,900 means some 700,000 people will start paying 40 per cent tax. That's on top of the the 3.13 million people already paying higher rate tax.
Partly because of those changes, our figures show that from next April single people with children or a couple with one earner and children will be worse off if they have an income of £45,000 or more. At that level the monthly loss will be £42. A single person with no children will, by comparison, only be £14 worse off.
The financial pain for a couple with children where both earn won't start until their income hits a total of £50,000. At that level they will be £18 a month worse off from next April, although if they earn £60,000 they will actually be £19 a month better off. At £70,000 there will be no change for couples where both earn, but at £80,000 the loss will be £8 a month, and climbs as income increases.
There'll be more pain ahead as the freeze on the higher rate tax band for three years will certainly drag thousands more into the 40 per cent tax bracket.Reuse content