Can someone simplify the budget changes for tax credits

Deb__123

Sigh try being self employed over 30 hours. Earning under 6k per year with no dependants..

Not only will i lose £840 tax credits but i also won't get the benefit of the living wage increase..

pcman1985

Pedent wrote: »

How have you worked out those numbers?

My understanding is that the increase in the taper rate from 41% to 48% means that claimants will lose 7% of earnings over £6420. As the reduction in the earnings threshold from £6420 to £3850 means that an additional £2570 of their income will be used to taper away their award at the new 48% rate, they'll also lose a further £1234 (assuming that they earn over £6420).

If that's right, then a single parent family with two children, working 30 hours+ on £15,000 paying childcare will be £1835 worse off (£35/week):

((£15000 - £6420) * 0.07) + ((£6420 - £3850) * 0.48) = £1835

Why do I get a different figure to you?

You calculate it like this

((£15000-£12125*0.48) = £1380 loss of CTC

£12,125 is the new withdrawal point of CTC from next year

Income would have been too high for WTC, even under the current system

Casual_Bystander

kerryallc71 wrote: »

yes it to has been lowered to £12,125.00 .

Thanks for that, looks like i'm ok then (£3200 a year CA plus £5000 a year rental income)
Guess i'm one of the lucky ones. Was worried i'd lose alot if they means tested carers allowance and/or reduced my CTC

Cas

Casual_Bystander

pcman1985 wrote: »

You calculate it like this

((£15000-£12125*0.48) = £1380 loss of CTC

£12,125 is the new withdrawal point of CTC from next year

Income would have been too high for WTC, even under the current system

As i undertood it, if you work enough hours to qualify for WTC, even if you earn too much to get WTC, the limit of £6420 now £3850 applies, it's only if you don't work or work below the required hours that the £16105 now £12125 applies

Cas

Pedent

Casual_Bystander wrote: »

As i undertood it, if you work enough hours to qualify for WTC, even if you earn too much to get WTC, the limit of £6420 now £3850 applies, it's only if you don't work or work below the required hours that the £16105 now £12125 applies

Cas

That's how I thought it worked too: If you meet the criteria for WTC (ignoring income) then you 'get' WTC, even if it all gets tapered away leaving you with just some CTC. You only get just CTC if you don't meet the criteria for WTC (ignoring income).

Where's Ice Queen when you need her?

ymakesmile

Pedent wrote: »

That's how I thought it worked too: If you meet the criteria for WTC (ignoring income) then you 'get' WTC, even if it all gets tapered away leaving you with just some CTC. You only get just CTC if you don't meet the criteria for WTC (ignoring income).

Where's Ice Queen when you need her?

I also believe this to be the case.
I also came across this in an article which is what I used to try and get my head round what our own figures will look like....

This is where the real big cuts will come for most households from April 2016 onwards. The income threshold below which households receive the maximum amount of benefits will be reduced from £6,420 to £3,850. What this means is that for ever £1 a household earns over £3,850 will be reduced by 41p. However the rate of reduction INCREASES to 48p. Which therefore implies a tax credits cut of upto £1,233 per household. Furthermore the jump from 41p to 48p amounts to a 7% benefits cut on payments ABOVE the previous threshold of £6420 i.e.

Tax credit cut of 48p per £1 earned on the first £2,570 (£6,420 - £3,850) = £1233.

Tax credit cut of 7p per £1 earned above £6,420.

Household Income Examples -

£16k income - Cut = £1233+£670 = £1,903

£18k income - Cut = £1233+£810 = £2,043

£20k income - Cut = £1233+£950 = £2,183

£24k income - Cut = £1233+£1230 = £2,463

Pedent

That's exactly how I was doing the calculations, but it doesn't seem to match the figures that others are giving.

Icequeen99

Pedant - you are correct the 12125 only applies if you do not qualify for WTC. If you qualify but do not receive it because your income is too high then you use the WTC threshold.

I'm out today so only on my phone.

IQ