In an almost unprecedented move, the House of Lords has backed a motion asking the government to revise its proposed tax credit cuts. This is the first time in 100 years that the lords have voted down a financial package and this is an embarrassing blow to George Osborne. The Chancellor has been asked to delay his proposed tax cuts until he comes up with a way of compensating low paid workers over the course of the first three years.
At present 9 in every 10 households receive tax credits but under the Chancellor’s new proposals this would reduce to 5 out of every 10 from April 2016. This means 3 million working families would lose, on average, about £1000 if the proposed changes go through next April.
Working Tax Credit & Child Tax Credit
There are 2 types of credit; Working Tax Credit and Child Tax Credit. Under the Chancellor’s new proposals the ‘thresholds’ would be reduced. The Working Tax Credit threshold would reduce from £6,420 to £3,850 while the Child Tax Credit threshold would reduce from £16,105 to £12,125, both changes meaning that people are likely to receive less from the Government. George Osborne insists that, with the increase in personal tax allowance, the increase in the National Living Wage and the new extensions to help with child care, the majority of people would be better off despite the proposed changes to the Tax Credits thresholds. He also says he would help struggling families in the transition period, details of which he will announce in his Autumn Statement on 25 November 2015. We look forward to hearing his plans.
There has been a great deal of press coverage on these cuts recently, but should you wish to clarify things by getting independent, expert tax help and advice, then TaxFile will be more than happy to help you with this or any other tax-related matter. We’re used to dealing with the tax rules and indeed with HRMC themselves, on our clients’ behalves. You can contact Tax File on 0208 761 8000 or call in to see them at their South London branch in Tulse Hill SE21. You can also book an appointment online for a free introductory meeting in their Tulse Hill office.