Next April Tax Credits are changing. Despite my question last week on which should I reduce, electric or food, the PM hasnt let me know his thoughts ( funny that ). So the changes are happening and you may be wondering if it will effect you.
[bctt tweet=”In short anyone receiving tax credits with a household income above the new threshold of £3,850 will receive less in tax credits from April than they do now. “]
Mr Osborne says that with the introduction of the National Living Wage, tax changes and the rising minimum wage most families will be better off. This isn’t the view shared by all though. The Resolution Foundation think tank and the independent Institute for Fiscal Studies point out that all the Budget changes that Mr Osborne keeps going on about do not come into effect at the same time. So in plain English your tax credits get cut next April 2016 but the National Living Wage that’s going to save the day doesn’t get to it full amount till 2020. Also its been pointed out by the Resolution Foundation that the National Living Wage compensates only 13% of the lost income faced by the poorest 50% of households following the budget. They go on to say that “We estimate that ‘a standard’ tax credit family – a single earner couple with children – must be at least £985 a year worse in 2016,” .
[bctt tweet=”Research by the IFS says that 8.4 million working age households, with someone in paid work and receiving benefits or tax credits, will lose £750 a year, and only gain £200 a year from the National Living Wage.”]
At present tax credits dont tapper off till you have a annual income of £6,420 or more. From April that figure changes to £3,850. So tax credits start to be withdrawn for each pound over £3,850. There are further changes in a years time. Any family which has a third child or subsequent child born after April 2017 will not qualify for more child tax credit.
How do you know if you will be affected?
Around the end of October letters will be arriving on doormats to explain the changes to their entitlement. If you want to know now there is a tax credit calculator run by the HMRC that you can check. HMRC Tax Credits calculator This calculator, to me, is a bit basic. The two below are better with the EntitledTo telling you of changes next year. They both work our rent too and if you are self employed AND working as well then the Turn2us one is best.