Osborne Vs Balls. Working families - who is right? Autumn statement 2012 – benefit cuts

Example: No housing costs

2012/2013

Lone parent with 1 child.

Works 30 hours per week and earns £20,000 per year.

Net pay after tax and NI = £310.23 per week

Child Benefit of £20.30 per week.

Tax Credits of £44.75 per week.

Income in hand total = £375.28 per week

TAX AND NI CALC USING http://www.uktaxcalculators.co.uk/custom-tax-calculator-2013-2014.php and for guidance only.

2013/2014

Works 30 hours per week and earns £20,000 per year.

Net pay after tax and NI = £315.73 per week

Child Benefit of £20.30 per week.

Tax Credits of £45.71 per week.

Income in hand total = £381.74 per week

Better off by £6.46 per week compared to 2012/2013

TAX AND NI CALC USING http://www.uktaxcalculators.co.uk/custom-tax-calculator-2013-2014.php and for guidance only.

Approx rise in income 1.7%

 

Example: With housing costs

2012/2013

Lone parent with 1 child. Liable for rent £110 per week. Council Tax £20 per week.

Works 30 hours per week and earns £20,000 per year.

Net pay after tax and NI = £310.23 per week

Child Benefit of £20.30 per week.

Tax Credits of £44.75 per week.

Income in hand total = £375.28 per week

BUT has to pay rent of £103.66 per week (gets £6.34 HB)

And FULL CTB £20 per week

Money left over after rent and ctax paid £251.62 per week

TAX AND NI CALC USING http://www.uktaxcalculators.co.uk/custom-tax-calculator-2013-2014.php and for guidance only.

2013/2014

Works 30 hours per week and earns £20,000 per year.

Net pay after tax and NI = £315.73 per week

Child Benefit of £20.30 per week.

Tax Credits of £45.71 per week.

Income in hand total = £381.74 per week

TAX AND NI CALC USING http://www.uktaxcalculators.co.uk/custom-tax-calculator-2013-2014.php and for guidance only.

BUT has to pay rent of £106.86 per week (gets £3.14 HB)

And FULL CTB £20 per week

Money left over after rent and ctax paid £254.88 per week

Better off by £3.26 per week in 2013/2014

Approx rise in income 1.3%

Please note these calculations have been put together really quickly and I have used estimated 1% increases for HB and CTB figures as announced in the Autumn Statement. NO official benefit rates have been confirmed for working age benefits as yet, so these calculations are for guidance purposes only and are subject to change. IncomeMAX advise everyone to seek advice for their own personal circumstances.

The key issue to highlight is that if you are working with housing costs and you access housing benefit and council tax benefit then your increase in net income will not be as high as it might have been with the new income tax personal allowance rate.

Also, it shows that even though the Govt may have raised the income tax threshold, this still does not necessarily mean you will see a rise in income that is level with or exceeds inflation if you are on a low income.

So who is right? Osborne or Balls? In their own unique way, they both are.

Low-income working families will not see rises in income to cope with inflation and rising costs, which they might have if benefits such as tax credits were uprated in line with prices. Benefit claimants such as JSA and Income Support claimants will definitely not see income increases to cope with price rises.

But a rise in income is still a rise in income – and the Govt believe it is fair that benefits including tax credits should only go up in line with how wages have been going up – around the 1% level.

The final point we at IncomeMAX want to make is this. It might be fair. But is it helpful? 1% income increases for low income families across the board (workers, lone parents and couples with children, disabled people on ESA, people on maternity leave etc) will do little to help the underlying issues of fuel poverty, child poverty, lack of jobs, debts (including energy and water bill arrears) and rising prices of essentials such as food bills.

With THREE years of benefits squeezes and Universal Credit just around the corner, it's hard to know how families will cope.

Lee Healey

6th December 2012

Tax Credit Rates 2012/2013

 

Working Tax Credit

Basic element ____________________1,920.00

Couple/lone parent ________________1,950.00

30 hours element ___________________790.00

Disability element _________________2,790.00

Severe Disability element ___________1,190.00

Childcare costs (70% of up to)

1 child (weekly rate)_______________175.00

2+ children (weekly rate)___________300.00

Child Tax Credit

Family element_____________________545.00

Child element ____________________2,690.00

Disabled child ____________________2,950.00

Severely disabled child _____________1,190.00

Threshold £6420

Taper used 41%

Tax Credit Rates 2013/2014

 

 

Working Tax Credit

Basic element ____________________1,920.00

Couple/lone parent ________________1,970.00

30 hours element ___________________790.00

Disability element _________________2,855.00

Severe Disability element ___________1,220.00

Childcare costs (70% of up to)

1 child (weekly rate)_______________175.00

2+ children (weekly rate)___________300.00

Child Tax Credit

Family element_____________________545.00

Child element ____________________2,720.00

Disabled child ____________________3,015.00

Severely disabled child _____________1,220.00

Threshold £6420

Taper used 41%