The Government will bring forward proposals to
help young workers, childless couples and pensioners aged
60-64.
·
For pensioners aged 60-64, where incomes tend to be more stable,
the Government is going to see if those households who have lost
out from the removal of the 10p starting rate of income tax can be
helped through the mechanism that already exists to pay the Winter
Fuel Allowance.
·
For other low paid families currently outside the working tax
credit system, while the Government will examine all practical
propositions, the focus is on potential changes to the tax credits
system to allow the average losses from the removal of the 10p
starting rate of income tax to be offset.
· At
the same time, the Government has asked the Low Pay Commission to
report on what changes could be made to the minimum wage regime to
support younger workers. We will look at other measures alongside
this.
-
All
pensioners over 65 who benefit from the age related allowance are
better off as a result of this package. This is because the
pensioners tax free allowance which applies when people reach 65 is
being increased by £1,180 above inflation. This more than
compensates them for any loss due to the removal of the 10p rate.
It takes 600,000 pensioners out of tax altogether. And those who
continue to pay tax will still be better off.
-
The vast
majority of families with children are better off as a result of
this package, thanks to increases in the Child Tax Credit, the
Working Tax Credit and Child Benefit. For example any single earner
couple with 2 kids on an income between £10,000 and 20,000 a year
will be £465 better off.
The position is more complicated for
couples due to the interaction between individual taxes and
household benefits. However:
·
Two-earner couple with 2 children both earning £5,000 will be £638
better off
·
Two-earner couple with 2 children both earning £10,000 will be £94
better off
·
Single earner couple with 1 child with an income of £6,000 will be
better off by £468
-
Low paid
workers without children may well be better off if they are
entitled to the working tax credit, which applies to those over 25
working more than 30 hours. A single earner on up to £12,900 a year
is entitled to the working tax credit. A couple are entitled to
working tax credit if their household income is up to £17,450 a
year. For someone on £10,000 a year, it is currently worth over
£1,100. The increases in the working tax credit mean that many low
income single earner households should be better off. For example
for people over 25 and working over 30 hours:
· A
single earner couple on £12,000 a year will be £166 better
off
· A
single earner on £10,000 will also be £166 better off.
·
And all those entitled to the WTC will be better off.
-
If people have
any questions about claiming they should ring the tax credit
helpline on 0845 300 3900. The tax credit system is now working
well for the 6 million families who are in receipt of tax credits,
following the package of improvements announced in the 2005
Pre-Budget Report. HMRC are rolling out a further series of
initiatives to improve the service to those claiming tax credits.
The Government remains determined to build on these improvements
and will be bringing forward further proposals by summer
2008.
-
Those who
are not eligible for tax credits or the pensioner allowance may
also be helped by other measures. For example:
-
-
Winter
fuel payments of £200 for households 60+ and £300 for 80+ for the
duration of this Parliament, with one-off additional payment of
£100 to over 80s households and £50 to over 60s households in
2008-09.
-
Pension
credit, since the introduction of which relative poverty amongst
pensioners has fallen by around 700,000.
·
Free off-peak bus travel across England has been made available for
all over 60s from April 2008.
·
Budget 08 confirmed an increase in the adult rate of the National
Minimum Wage to £5.73 and of the youth rate to £4.77. In real terms
the NMW has risen by about 23% since April 1999.
-
Those who
are paying more this time are on average £500 better off than under
the 1997 tax system, even before taking into account further
changes since Budget 07. For example:
-
-
60-64’s
are over £750 better off due to increases in state pension and
introduction of pension credit
-
couples
without children are £185 better off due to NIC and income tax
reforms, and the introduction of tax credits
-
under 25s
are £180 better off due to NIC and tax reforms
7. In addition, no individual
should be more than £4 a week or £232 a year worse
off.
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