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Tax credits reduce incentive to work more?

(127 Posts)
11stone4 Thu 07-Feb-13 17:11:51

My best friend Has found this to be the case. The more hours she works the less tax credits she gets. So what's the point exactly to work longer hours to get working and child tax credits to be reduced. I'm a SAHM FWIW

foslady Thu 07-Feb-13 19:46:23

But not all of us think like this - I'd rather have £2 more in my pocket and £1 less state grip on me........

FeeFiFoMum Thu 07-Feb-13 19:50:08

liareggub am in a very similar position as you and have been very reliant on tax credits.

Single, have a disability, two DCs under 5. I manage to work 25 hours per week but for a fairly low wage - prior to DCs I was a high-earner and worked 35 hours+ per week. I currently rely on WTC/CTC and DLA to make ends meet but will also increase my working hours - hopefully - once the children start school. I am able to pay for childcare, up to 70% of which is paid, live frugally, and this suits me very well as I don't want to be a SAHM.

dashoflime Thu 07-Feb-13 19:51:29

Tax Credits tapers (reduces) at 41% of extra income earned, so although your friend will lose out if she works more- the additional pay should more than make up for it.

I think your friend hasn't done her sums

Universal Credit will taper at 80% so there will be a large financial disincentive to work under the new system

FeeFiFoMum Thu 07-Feb-13 19:52:17

Also I agree with what everyone has said about not liking being dependent on the State. Every time something changes just little e.g. my working hours/income/disability rate, I have to inform WTC/CTC and they immediately adjust my tax credits so it is very hard to predict what I will have from month to month as the calculations they do are really quite complex at this level. That leads to uncertainty and some anxiety as does the ability of the government to change the eligibility for tax credits in any budget.

mercibucket Thu 07-Feb-13 19:56:42

It works at the other end as well. Now cb is cut if you earn over 60,000 there is no way we are bothering with promotions til the kids are grown. I expect we are lazy scroungers too

LineRunner Thu 07-Feb-13 19:57:59

Milky Judgy Catchy Monkey

Orwellian Thu 07-Feb-13 20:02:51

The tax credits system is nuts.

It is basically a way in which the taxpayer subsidises big business so they don't have to pay a proper wage.

It pays more for each child so incentivizes people to have children they could not otherwise afford.

It stops people from taking better paying jobs which after tax would mean a cut in income, so punishes success and aspiration.

It would make much more sense to simply raise the income tax threshold before anyone pays tax or national insurance, which would reduce the cost of administration of tax credits and the absurdity of taking tax/NI and then giving it back in the form of tax credits. Would also encourage more people to work if they could keep all of their salary.

I never understood why it is called "tax credits" seeing as it has nothing to do with whether anyone has actually paid any tax or not. It is just another benefit.

PolkadotCircus Thu 07-Feb-13 20:11:46

Property that is absolutely nuts,your friend on 32k will be getting the same as somebody on 39k per month.Nobody needs tax payers money to get them on the equivalent of 39k.If you want to earn that much get a second job. I pay tax to help families properly in need not to extend decent salaries.Tax credits sooooo need to go.

Wallison Thu 07-Feb-13 20:15:31

I think the reason it was called "tax credits" and was handed out to "hard-working families" was because the well-heeled portion of the electorate would balk at all of their tax-money going to something called an "in-work benefit" - which is what it is. This is also the reason why even people earning 2x the national average wage could get some money out of it, despite not needing it in any way shape or form - it was to sweeten the fact that it was a pretty-much wholescale redistribution of wealth to make up for shit employers paying shit wages (rather than tackling the problem at source which is, of course, shit wages).

So it will be a sad day when it goes.

Wallison Thu 07-Feb-13 20:17:02

You can't get tax credits for wages under £26k now, I think, PolkadotCircus.

Wallison Thu 07-Feb-13 20:17:15

Oops *over I mean.

CloudsAndTrees Thu 07-Feb-13 21:06:37

I think the reason it was called "tax credits" and was handed out to "hard-working families" was because the well-heeled portion of the electorate would balk at all of their tax-money going to something called an "in-work benefit" - which is what it is.

Working tax credits are handed out to people that work, but Child tax credits are nothing to do with whether someone works, or has ever paid even a penny in tax.

The labour government did a brilliant job of confusing people and making them believe that tax credits aren't actually a benefit, I've heard plenty of people say they don't get any benefits, but that they do get tax credits.

LineRunner Thu 07-Feb-13 21:12:43

Child tax credit isn't actually a qualifying benefit for anything, though.

Wallison Thu 07-Feb-13 21:26:29

CTC is only paid to people who are unemployed in the same way as IS used to be though - they aren't getting any more money, it's just that it's split between tax credits and IS/JSA.

morethanpotatoprints Thu 07-Feb-13 21:27:00

As a family we receive WTC, CTC and I don't work as we were worse off when I did work.
I am not lazy but I have never known anyone prepared to work for minus money as I was doing.
I had no chance of a contract which would have given me more money, nor could I ever get more hours, they just weren't available.
This was not some menial work, although there is nothing wrong with this type of work.
It was teaching, and I am fully qualified too.
If I now lose the benefit, well so be it. I am enjoying myself too much now work. However, checking the online comparison it appears we will not lose anything. In fact with the new UC including all benefits we could also be entitled to discounted council tax.
This government despite its spin is not encouraging everyone to seek employment. Besides the fact there aren't jobs for everybody.

sydlexic Thu 07-Feb-13 21:52:00

Absolutely agree. I know of a company that pays everyone minimum wage, none of the employees care as they get the top up from TC. They work part time even though full time is available because they do not want to work for what they can get for free. One of them gets £1500 per month maintenance which is not taken into account for tax credits, also housing benefit and her property tax paid. This equates to a gross income of 36k, for working 24 hours a week. The system is crazy and unfair.

LineRunner Thu 07-Feb-13 21:55:38

£1500 per month maintenance [I assume you mean child support] is so rare as to be meaningless to policy discussions of tax credits.

That sum would be taken into account by the way when assessing housing benefit. And I have no idea what 'property tax' is or how indeed you know so much personal financial detail about an employee at a company of which you know.

flaggybannel Thu 07-Feb-13 22:11:44

<marking my place, watching with interest>

PolkadotCircus Thu 07-Feb-13 22:29:19

Syd noooooooooo!shock

usualsuspect Thu 07-Feb-13 22:31:52

You know the personal circumstances of every single one of the employees? how so?

janey68 Thu 07-Feb-13 22:34:33

Of course the system is nuts!

As others have said unthread , Given the choice between unemployment and working, most sane people would choose employment, because its more fulfilling than being bored shitless and losing self confidence.

But when it comes to a choice between working, say, 4 days a week or working full time but in reality being no better off, many people would choose the 4 day option. Likewise, given the choice between working in a reasonably low stress role, or taking on a higher level, higher paid but higher stress job, which leaves you no better off, many people will stick with the easier option.

The system, whatever its original intentions, has ended up not rewarding aspiration.

However, changes are happening and it's just the tip of the iceberg, I reckon before long, the people who have played the system will be up shit creek, the country is bankrupt !

pumpkinsweetie Thu 07-Feb-13 22:34:41

Tax credits are there to help people live of the paultry wages they recieve or to help people provide for their child on jsa or is, which isn't a lot of money.

Don't judge until you have been there and when Camerob rules out his UC in april-october all of us will be fucked but i assume you will be laughing with him op

Dollyboo Thu 07-Feb-13 22:35:40

So who exactly is better off on universal credits? I find the new system very confusing add to the fact the online calculator is not working.

Dollyboo Thu 07-Feb-13 22:37:20

Pumpkin sweetie, , oh how mean you are. The Op is merely asking for our opinions.

morethanpotatoprints Thu 07-Feb-13 22:53:08


Most people aren't playing the system they are taking what's offered. If you had a strong principle of not working in order to be a sahm and you were sent a letter telling you to apply for tax credits because you were entitled to support as low income, would you take it?
The trouble with judging people is it can come back and bite you on the ass.
When I had my first ds1 aged 21 in the area I lived you were a bad mother if you worked, when I grew up you were a bad mother if you worked because there was no childcare, wraparound, nursery.
Now we have moved on and we have choices. Who are you to judge so harshly? For the record I'm not bored as I'm interesting, creative and inspired. My confidence is well intact thank you very much. Although I obviously wouldn't like to comment on how other people I have never met feel.

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