Indeed. If this does turn out to hit people earning around minimum wage, it's extremely unfair, tax credits or not. It would have saved me several hundred pounds on my tax bill this year, but I can afford that more than someone earning 10-12k.
But he's extended the reach of working families tax credit to those earning more than the median salary.
"Over one and a half million low income workers receive the working tax credit, worth to them on average £48 a week.
Indeed, in making work pay, people on low incomes get more benefit from the working tax credit than either the minimum wage or any other tax measure, whether it be the 10p rate or personal allowances.
If I invested £1 billion in helping low income workers through raising personal allowances they would be only 68p a week better off. If I used the same money to lower the 10p rate, they would be just 67p a week better off. But by using the same money to extend the working tax credit they are £7.10 a week - £370 a year - better off, a clear incentive to take jobs and to gain skills and to work your way up from a lower paid job to a better paid one.
So this Budget invests over £1 billion a year in raising the value of the working tax credit, so that building on the minimum wage of £5.52 from October, for the parent in full time work with one child it will rise to £7.70 - because of the working tax credit £290 for a 35 hour week."
From the Treasury's after speech briefing to journalists -
2% standard rate reduction cost 9.6Bn Increasing the 10% band to 20% gains 8.6Bn
The overall benefit to individuals totals 2.5Bn this comes from raises in duty and property avoidance.
Which won't be extended to everyone earning the low wage of 12k. Strikes me as quite unfair. Tax credit is not claimed by everyone entitled to it anyway. It's a cumbersome form of tax relief.
Based on the 2007 figures of 2230 @ 10% and then upto 34600 (next
32370) @ 22% I calculate that for anyone earning 34600 (or more) they will be just over 400 per year better off under this new scheme.
A student earning 7000 will pay about 200 more.
I'd much rather have seen him widening the 10% band (or tax free amount) and then extending NI (instead of 1% pay 2% or 3%) - (and I'd be one of the people who would be very hard hit by a change like this).
Eventually I'd like to see NI subsumed into income tax - make the whole thing transparent - but that's going to be politically impossible at the moment when the basic rate would now go to 31% and the higher rate to 41%.
Funny - isn't that the same amount as the higher road tax for the gas guzzling machines the higher rate prats like to chug around in? Co-incidence?
Good to see the Chancellor actively discouraging students from working to pay off all those horrid top-up fees...as if they needed an excuse not to work too hard anyway...
What about the average earner, those on the average wage of, what is it supposed to be now? 24k? Are they going to be better or worse off under the new income tax change?
No, because for higher earners it will be more than offset by the 2% reduction in the standard rate. Low earners - taxed only at 10%, or not very far up the standard rate band - will benefit little or nothing from the 22 -
Still, its seems convenient that whilst on the surface he's upsetting the people with the dosh (the supposd important people in society, who 9/10 drive comparitively environmentally unsound vehicles, just for the hell of it, it seems) with road tax rises, he's soothing their tempers a bit with a handout to cover the cost, which any fool will see will mean that the sum effect of that policy is that those who are rich enough to afford to drive around in big chelsea tractors, will continue doing so.
However, you've made a great point about those on higher incomes being able to afford a wider range of cars, some of which don't spoil the environment as much, whereas those on lower incomes who may wish to buy a more environmentally sound car, simply can't afford the extra expense.
Solution? Subsidise the purchase of enviro-cars through handouts / trade-ins or lower taxes on enviro-car producers, whilst at the same time highering taxes on the manufacturers of the most polluting.
From what I can tell so far from this budget is that the rich will get richer, the poor will get poorer and house prices will thus continue to increase (extra salary = extra house buying), inflation will certainly not go down - more money in the pockets of the rich = increase in standard prices of everything else for everyone. As usual.
Solution? Well, by inference, you'd think that they'd want us to think, we'd best get rich quick. A bit of motivation to get people off their butts and off of benefits, eh?
Yes, removal of the 10% band affects everyone except those earning less than the personal allowance, and those earning precisely £X.
Supposing that from 4/2008 the personal allowance will be £5400, and that the 10% band would have been £2300 wide, then everyone earning more than £5400 but less than £7700 will pay 100% more tax (i.e. their tax doubles from 10% to 20%), and those earning £7700 will suffer the maximum increase of £230. After that, it will require an extra £11500 of income to break down those £230 at 2%.
Hence people earning £X (where X equals 5400+2300+11500200) will be unaffected, while everyone earning between £5400 and £19200 (which is an awful lot of people) will pay more tax.
Those earning more than £19200 will also be affected, but they will pay less tax, though they'd have to be earning £30700 to be saving as much as someone earning £7700 will lose.
If you earn well over the 43000 mark you will be better off but by a very small amount, if you are under then next year you will do well and be hurt the following year.
And the more wealthy are more likely to be able to afford a house within walking distance of work or a railway station (although I still think the just about invisible premium on houses that are within say 1 mile of a mainline station is telling) and so not need a car at all.
Why subsidise cars at all? Why not give everybody basic rate tax relief on annual season tickets for public transport to and from their permanent place of work. (and I'd include that tax relief even for people who don't actually earn enough to pay basic rate tax)
I think there's also about 10% NI paid by the employer - half of this could be given to the employer for managing the season ticket purchase (the employer knows where you live and where you work so can verify that your season ticket is appropriate for work) and the other 5% can go to whoever provides an "interest free" loan to the employee - this could be the employer, or an external lender or the train company.
You might need to increase NI for higher rate taxpayers or do what Mr Brown has done and remove the 10% band to pay for it - I don't know how the figures would work out.
Astonishing in a way. Someone earning around 12k (which includes a lot of government employees FWIW) will be several hundreds of pounds a year worse off. Yes, tax credits for some of them, mostly those with children, but it's notoriously hard to get the credits- wonder why?
How on earth this government can get away with that, I don't know, but there you go. Then again, if someone had told me a decade ago that a UK Labour government would enter an illegal war at massive human and financial cost simply because a loony hard right-wing US government did so, I wouldn't have believed them either...
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