CAB - Only £33 a year gets to the pockets of the poorest working families from tax threshold changes
22 Mar 2012 11:56 AM
Poorer working families who get housing and council tax benefits will be just £33 a year better off from the tax threshold rise - because as their income goes up, their benefits will go down.
For every person who is eligible to pay tax - but also gets council and housing tax benefit - the Department for Work and Pensions (DWP) will claw back £187 of their £220 annual gain. Essentially what the Government gives with one hand it takes with another.
Citizens Advice Chief Executive Gillian Guy said: "The poorest working families will feel the Government has turned it's back on them - they needed this Budget to ease the pressure on their purse strings and make life easier. Instead they see high earners getting tax cuts.
"Raising the personal tax allowance is an empty gesture to struggling families on low wages who get housing and council tax benefits. For these families, the weekly gain is less than the price of a loaf of bread; a measly 63p per week.
"Not only has this Budget shunned the needs of the poorest working families - some face further hardship at the Government's hands with a cut of up to £3,870 in their annual income thanks to changes in working tax credit, due in the next couple of weeks.
"The Treasury's own figures show that the lowest income households lose more of their income from this Government's combined tax and benefit changes than nearly all of those higher up the income scale*.
"George Osborne has let these families down. To truly help poor working families the Government must ignore the extra £4.23 a week (£220 a year) income when calculating housing and council tax benefits - and delay the change to working tax credit until October 2013 when universal credit comes in."
Who gets what with the raise to the personal tax threshold
The tax threshold is to be raised by a further £1100 in April 2013. Someone earning above the current tax threshold will gain an extra £220 a year as a result of this measure.
Tax payers entitled to housing and council tax benefit will only gain an extra £33 a year (or 63p a week). That means £187 will be clawed back and put in DWPs pockets from reduced benefits.
In comparison a couple both earning £40,000 a total household income of £80,000 will gain £440 a year or £8.46 a week.
Disregarding the extra £4.23 a week (£220 a year) in income when calculating housing and council tax benefits would make sure the rise in threshold in this budget was kept by low income households
* Source: Budget 2012 data sources document (charts B1 and B2) http://cdn.hm-treasury.gov.uk/budget2012_data_sources.pdf
Notes to editors
The Citizens Advice service comprises a network of local bureaux, all of which are independent charities, and national charity Citizens Advice. Together we help people resolve their money, legal and other problems by providing information and advice and by influencing policymakers. For more information in England and Wales see citizensadvice.org.uk
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