Tax Credits

CLAPTON

zagfles wrote: »

If it's true her net income is zero, then the article is definitely right. The cuts to tax credits are massive, and there will be people who this will hit hard, but it's not those at the bottom, the more you earn the bigger the hit.

maybe maybe not

you make the assumption that people don't respond to financial stimuli : this is clearly an incorrect assumption.
they only need to work a few hours a week extra to regain the money.

kinger101

CLAPTON wrote: »

however, if she did get a job earning minimum wages she would, overall be better off.

I think the rules should certainly be tightened such that those who are self-employed and claiming tax credits must be able to demonstrate that their business has a reasonable potential of bringing in an income at least equivalent to the minimum wage. Otherwise, anyone can set up a "business" to avoid the requirement to seek work.

The state would be a lot kinder to the lady is question if they told her to knock this nail business on the head* and see what was available at her local Aldi or Tescos. I appreciate it can't be easy bringing up 4 children on your own, but her current business endeavours are entirely fruitless.

EDIT: *just spotted the unintentional pun

CLAPTON

kinger101 wrote: »

I think the rules should certainly be tightened such that those who are self-employed and claiming tax credits must be able to demonstrate that their business has a reasonable potential of bringing in an income at least equivalent to the minimum wage. Otherwise, anyone can set up a "business" to avoid the requirement to seek work.

The state would be a lot kinder to the lady is question if they told her to knock this nail business on the head* and see what was available at her local Aldi or Tescos. I appreciate it can't be easy bringing up 4 children on your own, but her current business endeavours are entirely fruitless.

EDIT: *just spotted the unintentional pun

I believe that the rules are being tightened with regard to false 'businesses' that are unlikely ever to be profitable

Maybe they should include the 'assumption' of at least minimum wage income for 40 hours per week.

As I have no clear idea about the ladies full circumstances I can't really comment , but clearly the whole 'self employed' status is grossed abused.

mystic_trev

kinger101 wrote: »

I appreciate it can't be easy bringing up 4 children on your own, but her current business endeavours are entirely fruitless.

She seems to have done quite well by selling her story to the Press. When she declares that Income that'll effect her Tax credits!

zagfles

CLAPTON wrote: »

maybe maybe not

you make the assumption that people don't respond to financial stimuli : this is clearly an incorrect assumption.
they only need to work a few hours a week extra to regain the money.

Well that's complete rubbish in most cases. People do respond to financial stimuli. Like the financial stimuli of having 80% of any extra money they earn being taken off them.

Take a family, 3 kids, on £20k. They would lose £2184. How many extra hours do you reckon they'd have to work? Let's see...

To gain £2184, they'd need to increase their gross income by £10920. Because of that extra £10920, they'd pay 20% tax, 12% NI, and 48% reduction in tax credits. Giving £2184 extra net (it'll be a bit less in the first year as there's a £2500 disregard in tax credits for income increases).

How many extra hours do you make that? I make it about 22 extra hours per week. Up from 40 to 62.

They might decide they may as well work less hours, since they'd lose less than £2 an hour if they reduced their hours.

kinger101

zagfles wrote: »

Well that's complete rubbish in most cases. People do respond to financial stimuli. Like the financial stimuli of having 80% of any extra money they earn being taken off them.

Take a family, 3 kids, on £20k. They would lose £2184. How many extra hours do you reckon they'd have to work? Let's see...

To gain £2184, they'd need to increase their gross income by £10920. Because of that extra £10920, they'd pay 20% tax, 12% NI, and 48% reduction in tax credits. Giving £2184 extra net (it'll be a bit less in the first year as there's a £2500 disregard in tax credits for income increases).

How many extra hours do you make that? I make it about 22 extra hours per week. Up from 40 to 62.

They might decide they may as well work less hours, since they'd lose less than £2 an hour if they reduced their hours.

In reality, I expect in most instances where there is a 2 parent households only working 40 hours, it's likely only one parent is in work. Hence the 2nd partner wouldn't pay any income tax on the first £10,500 if they found some work. Or NI on the first £8K

zagfles

kinger101 wrote: »

In reality, I expect in most instances where there is a 2 parent households only working 40 hours, it's likely only one parent is in work. Hence the 2nd partner wouldn't pay any income tax on the £10,500 if they found some work.

But they would get their tax credits reduced at 48% of the extra income, plus they might have childcare costs with both in work.

kinger101

zagfles wrote: »

But they would get their tax credits reduced at 48% of the extra income, plus they might have childcare costs with both in work.

At some stage, their children will be in education. Plenty of people with less a sense of entitlement are able to juggle taking kids to school with work.

Even when the kids are not of school age, there is also evening work available part time (bars, twilight shifts in supermarkets) that one parent can do once the other is home from work.

Most people pay 32% tax on their income (BR + NI). Some people pay 47% (AR + 2% NI). Are we really concerned about people who to some extent still reliant on state support losing 48% of their earned income?

zagfles

kinger101 wrote: »

At some stage, their children will be in education. Plenty of people with less a sense of entitlement are able to juggle taking kids of school with work.

Even when the kids are not of school age, there is also evening work available part time (bars, twilight shifts in supermarkets) that one parent can do once the other is home from work.

Most people pay 32% tax on their income (BR + NI). Some people pay 47% (AR + 2% NI). Are we really concerned about people who to some extent still reliant on state support losing 48% of their earned income?

80% when they pay tax/NI. Maybe 90% plus if they get housing benefit as well. Yes anyone with any sense is concerned, as it creates poverty traps and makes it "not worth working", which increases the cost to the taypayer.

Except the dimwits who set Labour's "child poverty" targets, they're delighted, as keeping working families' income close to out of work families' income keeps "child poverty" low. Or lower than it would be with a progressive system.

CLAPTON

zagfles wrote: »

Well that's complete rubbish in most cases. People do respond to financial stimuli. Like the financial stimuli of having 80% of any extra money they earn being taken off them.

Take a family, 3 kids, on £20k. They would lose £2184. How many extra hours do you reckon they'd have to work? Let's see...

To gain £2184, they'd need to increase their gross income by £10920. Because of that extra £10920, they'd pay 20% tax, 12% NI, and 48% reduction in tax credits. Giving £2184 extra net (it'll be a bit less in the first year as there's a £2500 disregard in tax credits for income increases).

How many extra hours do you make that? I make it about 22 extra hours per week. Up from 40 to 62.

They might decide they may as well work less hours, since they'd lose less than £2 an hour if they reduced their hours.

you illustrate the issue very well

an inevitable consequence of absurd means tested benefits is that the massive discouragement to earn more

no-one on 20k per year should be on means tested benefits in the first place

the sooner they are phased out completely the better