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to not understand this in the budget and to ask for your help

(7 Posts)
Fantasyland Thu 09-Jul-15 10:43:05

I really cant understand this in the budget and don't know if I'm reading it wrong and would appreciate your help.
◾Income threshold for tax credits to be reduced from £6,420 to £3,850

does this mean people in part time low paid jobs will lose a lot of money thus not making it better to work even part time (especially as full time hard jobs are harder to find now than p/t)?

Wouldn't this encourage people to go on benefits as finding full time very hard at the minute?

is the idea behind this to encourage full time work?

crazykat Thu 09-Jul-15 10:53:13

There's a few online calculators which give an idea of how you'll be affected. I tried it and if I was working full time then we'd be about 3k worse off, working part time we'll be about 2k worse off so it doesn't really encourage full time work, not that there's any going where I am.

The threshold, as I understand it but may be wrong, is that just under the first £7000 of earned income is disregarded in the tax credit calculation. This will halve to just over £3000 being disregarded. So for the purposes of the calculation you'll have a higher income. In real terms it means everyone will get a lot less in tax credits with not much hope of making it up through extra hours unless you earn enough to not qualify in the first place.

tabulahrasa Thu 09-Jul-15 10:53:34

It won't just affect part time workers, it affects anybody claiming tax credits.

crazykat Thu 09-Jul-15 10:54:37

I got my figures slightly wrong for the threshold but the principal is still the same, there's a big drop in the income disregarded for the calculation so there will be a noticeable drop in the amount of tax credits people will get.

Fantasyland Thu 09-Jul-15 11:04:20

I have just had a look at different scenarios and it doesn't affect people not working any hours which makes it more confusing that it is supposed to encourage people to work as soon as you do you lose a lot of money.

crazykat Thu 09-Jul-15 11:17:09

It's the drop in the income threshold that's going to cause a drop in tax credits, so if you aren't working then the income threshold doesn't matter.

The budget has been touted as 'reducing the benefits bill' and making it less attractive to not work but it will do the opposite imo. Those who are working will have a drop in income while those not working will be fine and dandy.

tabulahrasa Thu 09-Jul-15 11:22:31

If you're not working then it's the other benefit changes that will affect you, not the tax credits one.

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