Working out whether you benefit or lose out from a budget is invariably a complicated process for any family. On the one hand you may gain, but on the other lose.
For families, George Osborne’s budget contained the usual mix of good and bad news. But while families will gain up to £381 when the personal allowance threshold rises in 2013, the change in working tax credits could see them as net losers.
According to the TUC, some could lose more than £4,000 in the same period.
Changes in tax credits are coming into effect tomorrow (Friday 6 April). The TUC has launched a new tax credit calculator to help families work out how their household budgets are going to be affected. It is available on the TUC touchstone blog and on mumsnet the online parent community.
By inputting household details, income, number of children and childcare costs parents can see how their income has been affected by the tax credits changes.
According to the TUC tax credit calculator, a family with a stay-at-home mum, and a dad working part-time on £19,000, with a 12-month old child and a 4 year old, will gain £191 from changes in the personal allowance by April 2013. But they will lose around £4,500 – 24 times as much – from tax credit changes.
A double income family (combined income £40,000) with two children and childcare costs of £300 a week will gain the maximum possible from the personal allowance increase (£381) but still lose six times as much (£2,312) from tax credit changes.
Families with high childcare costs and couples working 16 -24 hours a week are the most affected by the working tax credit changes and child benefit freezing.
The personal allowance threshold is now being raised to £8,105. But the TUC points out that this would have increased to £7,152 by being uprated by RPI inflation anyway, so for the basic taxpayer £76 of the £126 gained would have come into effect regardless of the allowance changes.
Brendan Barber, TUC General Secretary said: “Millions of people will be getting a small boost from the personal allowance increase this Friday, but working families are likely to have lost far more from cuts to tax credits.
“With unemployment at a 17-year high and full-time jobs being replaced with part-time ones, parents struggling to find 24 hours of work between them could lose thousands of pounds. Complicated changes to child benefit for higher rate taxpayers will provide further financial headaches for many parents this year.”
He said that families are bearing the brunt of the government’s austerity measures and that the government should prioritise support for working families over the tax cuts offered to the highest earners.