Families will be over £3,000 a year worse off by 2015 as a result of tax credit cuts

date: Sunday 7 April 2013

embargo: 00:01 hours Monday 8 April 2013

With many tax credit changes that could leave families thousands of pounds out of pocket taking effect from today (Monday), the TUC has updated its tax credit calculator to help parents find out how they will be affected by the government's recent changes.

The tax credit calculator - available on the TUC touchstone blog - allows working parents currently in receipt of tax credits to add their household details, such as income level and number of children, and then estimate how they will be affected by the tax credit changes by the time of the next election.

Many parents could be in for a shock when they realise how much they stand to lose by 2015/16, says the TUC.

For example, a dual earner family with incomes of £25,000 and £15,000, two children (a baby and a toddler), paying £300 a week in childcare for 45 weeks of the year, could lose over £3,000 a year by 2015/16, according to the TUC tax credit calculator - a fall of over 30 per cent on their previous entitlement.

The tax credit changes featured in the calculator include:

the abolition of the Baby Element of Tax Credits from 2011/12 and not introducing the Toddler Element from 2012/13.

the reduction in 2011/12 of the amount of eligible childcare costs that tax credits will pay for by 10%.

the increase in 2011/12 in the hours eligibility for couples claiming Working Tax Credit to 24 hours.

up-rating Child Tax Credit and Working Tax Credit (excluding the disability elements) by 1 per cent from 2013/14 to 2015/16.

up-rating the Basic and 30-hour elements of tax credits by 1 per cent in 2014/15 and 2015/16.

The tax credit changes come on top of changes to the way in which many other family benefits will be up-rated, which will significantly reduce their generosity over time.

The combination of tax credit cuts, the rise in VAT, the real-terms cut to other family benefits and deep spending cuts will result in working families being hit hard, warns the TUC.

While many working families will see a small benefit from the increased personal allowance the government has introduced this will be more than offset by VAT increases alone. When tax credit cuts are also included working families are set to see substantial losses, says the TUC.

TUC General Secretary Frances O'Grady said: 'The government should be prioritising support for working families but seems more interested in coming up with new ways to squeeze their living standards.

'This calculator highlights the huge amounts some households will lose in tax credits by 2015/16, with some families over £3,000 worse off. This is far more than they will gain from the increased personal allowance, and that's before wider cuts and VAT rises have even been taken into account.

'Cutting tax credits is not the way to get our economy moving again but is part of a wider assault by ministers on vital family benefits. Making families poorer is no way to start an economic recovery.'

NOTES TO EDITORS:

- The TUC's tax credit calculator can be found at: http://touchstoneblog.org.uk/tax-credit-calculator/

- Dual earner family earning £40,000 (both working full-time with one earning £25,000 and one earning £15,000), two children (one baby and one toddler) and paying £300 a week in childcare for 45 weeks of the year will have lost £3,302 by 2015/16

- Dual earner family earning £20,000 (one partner working 16 hours per week earning £15,000 and one working four hours per week earning £5,000), two children (one baby) and not paying for childcare could be losing £1,281 by 2015/16.

- Dual earner family earning £50,000 (£40,000 and £10,000), three children (including a baby and a toddler) and paying £300 a week in childcare for 45 weeks a year could be losing £3,412 by 2015/16.

- Lone parent family earning £15,000 and working 20 hours a week, two children (one in receipt of the higher rate care component of disability living allowance) and paying £150 a week in childcare for 40 weeks a year could be losing £1,357 by 2015/16.

- TUC analysis on the impact of the VAT rise relative to the personal allowance is available here: http://www.tuc.org.uk/economy/tuc-22013-f0.cfm.

- All TUC press releases can be found at www.tuc.org.uk

- Follow the TUC on Twitter: @tucnews

Contacts:

Media enquiries:
Liz Chinchen T: 020 7467 1248 M: 07778 158175 E: media@tuc.org.uk
Alex Rossiter T: 020 7467 1337 M: 07887 572130 E: arossiter@tuc.org.uk