The budget box. Photo credit: The National Archives.
Tax and benefit changes will come into force this week as the new tax year starts. Chancellor George Osborne’s plans mean that the amount of income to be tax free is now £8,105, a rise of £630, and a further rise of £1,000 is expected next year. Some benefits will rise by 5.2 per cent, such as jobseeker’s allowance, income support, inheritance tax allowance, disability benefits, maternity benefits, incapacity benefit and child benefit.
Couples with children will have to work 24 hours between them, rather than 16, to qualify for working tax credit. The child part of child tax credits is going up to £135, but the couple and single parent parts of working tax credit are frozen.
The government has pointed towards the many benefits of the tax changes; but it stands accused of giving with one hand and taking with the other, as 1 million middle to low income families will be worse off.
“‘May you live in interesting times’ goes the ancient Chinese curse, and as far as tax is concerned, we live in very interesting times indeed. Tax today is a minefield, with changes taking place part-way through a year and announced one, two, or even sometimes three years ahead,” said Rachel Finch on the Weston and North Somerset Echo.
What do the opposition say? The Labour party have said that this would leave many families £511 a year worse off. “”These cuts to tax credits for parents on middle and low incomes are breaking yet another promise David Cameron made during the general election campaign,” said Ed Balls, the shadow chancellor. The left wing newspaper The Morning Star wasn’t particularly happy about the whole thing. It even said that Good Friday “will turn into bad Friday,” although the first person to say that was the Child Poverty Action spokesman.
What else is important? Bitterwallet asked if we were feeling lucky, punk, then summarised the most important changes: the level at which you pay income tax at 40 per cent is being frozen to £42,475. The Consumer Prices Index will be used as the “default indexation assumption” (nice) which apparently means that “more people will pay more tax than they would have done.” But council tax will be frozen – yay! Corporation tax will also fall, to 24 per cent. Basic state pensions will rise to £107.45.The income threhold for existing students to pay back their student loan is also increasing. Oh, and minimum wage for everyone over 21 is rising – by 11pence, to £6.19 per hour.
What should we do? The Money Advice Service says that we should set aside some time for reviewing our finances. We should be checking our rates of interest in savings and loans – there might be a better option. The government has also urged HMRC to send letters to anybody who will be affected by tax changes.
