Tax Credits

Generali

I heard that the net effect of removing tax credits and increasing the minimum wage was a cut in money coming in of £750/year.

At the higher minimum wage that's an extra 90 minutes work a week or 18 minutes a day on a 5 day week. That doesn't seem especially onerous.

To address the OP, I don't think that the taxpayer should be subsidising wages on a long term basis. I can see a reason to do so to help someone who is unskilled or perhaps long term unemployed into work. Having wages routinely topped up by the Government shouldn't be a business model however.

zagfles

Generali wrote: »

I heard that the net effect of removing tax credits and increasing the minimum wage was a cut in money coming in of £750/year.

That's rubbish. For those who get tax credits now, the cut is much bigger than that. For those who don't, it'll be a payrise.

At the higher minimum wage that's an extra 90 minutes work a week or 18 minutes a day on a 5 day week. That doesn't seem especially onerous.

Really? Have you taken into account that any extra earnings will be taxed at 20%, NI'ed at 12%, and reduce tax credits at 48%??

michaels

zagfles wrote: »

Yes assuming you've got enough AA to carry forwards! And relevant earnings this year of at least £60kPossibly but I'm not sure of the exact rules surrounding pupil premium & FSM.

Yes, another reason for doing this now as the 40k with 3 years rollover is bound to get cut even if nothing else changes. Also a change from wtc/ctc which are not asset assessed to universal benefit (is this yet scheduled for families?) which is would prevent all of this.

zagfles

michaels wrote: »

Yes, another reason for doing this now as the 40k with 3 years rollover is bound to get cut even if nothing else changes. Also a change from wtc/ctc which are not asset assessed to universal benefit (is this yet scheduled for families?) which is would prevent all of this.

I take it you're aware of all the shenanigans this year with the PIP alignment and split mini-tax years? If not see the pensions board there's a discussion there now. Likely to be good news for most people.

UC timetable keeps slipping, supposedly around 2016-17 for existing claimants but more likely 2017-18

michaels

zagfles wrote: »

I take it you're aware of all the shenanigans this year with the PIP alignment and split mini-tax years? If not see the pensions board there's a discussion there now. Likely to be good news for most people.

UC timetable keeps slipping, supposedly around 2016-17 for existing claimants but more likely 2017-18

Yes, I was working around PIP but the changes basically seem to mean that it is much more straight-forward to avoid running into any difficualties as the pension year has gained a second allowance (not total but in terms of payment timings)

Linton

Generali wrote: »

I heard that the net effect of removing tax credits and increasing the minimum wage was a cut in money coming in of £750/year.

At the higher minimum wage that's an extra 90 minutes work a week or 18 minutes a day on a 5 day week. That doesn't seem especially onerous.

To address the OP, I don't think that the taxpayer should be subsidising wages on a long term basis. I can see a reason to do so to help someone who is unskilled or perhaps long term unemployed into work. Having wages routinely topped up by the Government shouldn't be a business model however.

The people who will be affected most arent those on minimum wage, but rather those earning just above the new value of the minimum wage.. So presumably they will be affected far more than £750/year.

It isnt just a matter of the tax payer subsidising wages - the extra money paid to those most in need goes directly into the wider economy and so much will be recouped by tax income. Reducing tax credits will directly reduce GDP.

Perhaps it is more useful to look at tax credits as a tweak to the tax system rather than an extra benefit. They are useful in that they make it easier to adjust tax to people's circumstances than changing the basic rules of taxation. Reducing tax credits and using the money saved to reduce basic taxes has a net effect of moving wealth from the poorest to the richest. Is that what is intended?

zagfles

Linton wrote: »

The people who will be affected most arent those on minimum wage, but rather those earning just above the new value of the minimum wage.. So presumably they will be affected far more than £750/year.

It isnt just a matter of the tax payer subsidising wages - the extra money paid to those most in need goes directly into the wider economy and so much will be recouped by tax income. Reducing tax credits will directly reduce GDP.

Perhaps it is more useful to look at tax credits as a tweak to the tax system rather than an extra benefit. They are useful in that they make it easier to adjust tax to people's circumstances than changing the basic rules of taxation. Reducing tax credits and using the money saved to reduce basic taxes has a net effect of moving wealth from the poorest to the richest. Is that what is intended?

No, the people most affected are those who earn the most, assuming of course they are eligible for tax credits. You can be eligible for tax credits on quite high incomes eg if you have lots of kids/high childcare costs/disabilities.

Someone on around £11k would lose about £1550, someone on £25k would lose over £2500.

gadgetmind

zagfles wrote: »

Likely to be good news for most people.

Good news for me, but even more work reading rules and regulations and completely changing my spreadsheets.

gadgetmind

Generali wrote: »

To address the OP, I don't think that the taxpayer should be subsidising wages on a long term basis.

Agreed 100%. Unwindng it will take time, and there will be tears, but it has to be done.

Linton

Generali wrote: »

.....
To address the OP, I don't think that the taxpayer should be subsidising wages on a long term basis.

From that point of view all benefits to the fully employed are a subsidy for wages. But whether they are subsidy to the employer to get cheap staff or a subsidy to the staff to make up for their failure to be economically viable is an interesting question. If you believe the former presumably you would expect market forces to require employers to have to pay increased wages to compensate for their employees loss in Tax Credit. If its the latter then the people currently dependent on Tax Credits just get poorer.