Tax credits: cuts

[prunesquallor]

The Conservative proposal on tax credits;

"Stop tax credits to families with incomes over £50,000"

Ok, lets take a close look at that statement.

The website makes no differential between the working, children's or disabilty elements of tax credits.

Can we assume this means removing all tax credits full stop?

Tax credits are based on gross income, that is before income tax/NIC's are deducted.

Therefore, a working couple needs to check if the joint gross family income is more than £50k. If so, you could be looking at a drop in income.

As tax credits are based on the previous tax years gross income(s): we may "have a problem Houston". The party website doe's not provide any detail on how & when they intend to impliment the policy.

Will it be with immediate effect (based on the 2009/10 gross family income) or (as it will take time to identify everybody with gross income of more than £50k) - from the next tax year (April 2011) based on this years gross family income.

There is the possibility that a significant number of families, whom under current legilation are entitled to tax credits finding themselves subject to a retrospective change & so being billed for an overpayment running from April 2010.

NB: Office of National Statistics has the "average" gross wage as being £489 pw, which translates into £25,428 pa.

www.statistics.gov.uk/cci/nugget.asp?id=285

If you have a family income of £50k and one child your child tax credits are a whopping £42/month. It's pretty much a flat rate down to about £25k (from memory) when the numbers increase sharply. I don't think a family on £50k a year would be too traumatised by the loss of £40/month if the qualifying ceilings were adjusted.

So prunesquallor - how do you think we should start saving money to plug the gaping hole in the nation's finances?

Maybe we could have an amnesty for the first part of this year saying that if you have been paid it but are now not entitled you get to keep it - as that would be the sensible thing to do as would cost less to administrate.

Hasn't the tax credits thing been done to death already?

yawn

Perhaps someone will correct me but I've not yet had any adjustment in taxation that was retrospective. It gets announced in the budget and then applies to the forthcoming tax year, not the preceding one. I would think a change in tax credits would be on the same basis i.e anything announced in May 2010 would apply from April 2011.

I dont know, but if you read the institute for fiscal studies report on families and the three parties policies on tax credits it may help you. Also, in actual fact they and other sources are saying that it will be effecting those couples with a joint income of £30k [as of course it will all be pushed down if that makes sense!].