Tax: Changes Take Benefits from 230,000 Families



Families will lose thousands a year as child care costs rise.

Families will lose thousands a year as child care costs rise.

Changes in the tax code have made increasing numbers of people join the higher-rate tax bracket this year, as the government has lowered the 40% tax threshold.

This has pushed an extra 700,000 working people into a higher taxation band.

The result of the changes mean that 230,000 families are now excluded from child benefit payments.

Lowered limits

The income threshold for the 40% tax bracket has been reduced from £43,875 to £42,475. This move has forced hardworking professionals such as nurses and teachers into a the higher tax class.

The changes come as the government is implementing harsh austerity measures as part of its goal to reduce the UK’s record budget deficit.

Estimates place the amount of extra revenue from the 700,000 people set to pay more taxes at around £56 million.

The figure of 700,000 comes from accountants Grant Thornton, which says the number of higher-rate taxpayers have risen to 3.7 million Britons. Experts expect the number of UK workers in the higher tax bracket to hit 6 million by 2015.

Exclusionary

In addition to lowering the income threshold for the higher tax bracket, the government has also planned to cancel the child benefit for any households that have even one higher-rate taxpayer.

Child benefit can make up as much as £1,752 of extra income for UK families each year. Qualifying families can receive monthly benefits until their children are 16, or 19 if they are in higher education.

The tandem effect of the reforms are delivering a one-two punch to British families, analysts and family activist organisations say. Many feel that households with only one earner making below £43,000 are being unduly punished.

These families are arguably not well off enough to comfortably lose the extra income from child benefit, say critics.

In addition, the reforms do not take into account combined income from all working adults. This means that two working parents who each make £42,000, just below the threshold, will still be able to qualify for child benefit.

Meanwhile, a single-parent household making just slightly more, at £4,475, will be barred from child benefit despite the family having half the income.

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