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Election promise to raise tax threshold to £12,500 for minimum wage earners

Judy Scott
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I haven’t spotted any other comment on this but maybe have missed it?

If the Housing Benefit and Council Tax Support thresholds are not raised to match the new higher tax threshold then people will have these benefits reduced by 85p for every extra £1 of income gained. But people who own their home outright would only lose 15p.

Has there been anything in the news about this?

Also I wondered if there could be some people claiming HB and CTS who might effectively lose 85p of an additional £1 of income in benefits rather than 20p in tax.

And Working Tax Credit would be reduced also.

Any number crunchers out there? What is this election promise really worth?

Edmund Shepherd
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Tenancy Income, Royal Borough of Greenwich, London

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Why would working tax credit be reduced as a result of increasing the threshold for basic rate tax?

Judy Scott
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Working Tax Credit is based on your income. You pay less tax - your income increases

Edmund Shepherd
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Tenancy Income, Royal Borough of Greenwich, London

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Working Tax Credit is based on your gross income, not your net income.

Jon Blackwell
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It may have continued to rise anyway but compared to current rates £12,500 is +£1900 on the personal allowance @ 20% = +£380 net pa.  (You’d need about 37 hours current main NMW to benefit fully.)

If subject to 65% HB/UC taper (but not CTR) the net benefit is £133pa or £2.55 / week.

If subject to 65%+20% HB+CTR(*) tapers it’s £57pa or £1.10 / week.

If subject to 65%+(35%x20%) UC+CTR(*) tapers it’s £106.40pa or £2.05 / week.

*= (CTR in Scotland, Wales and England(default scheme))

Judy Scott
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Thank you Jon - I will send this to my MP

HB Anorak
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Or in Waltham Forest (and I am sure many other places too):

65% HB Taper plus 25% CTR taper = net gain of £38 a year, less than a quid a week.

Judy Scott
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Letter to the local paper?

stevenmcavoy
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I had a thread on this in the UC section earlier as well when i realised that the work allowances wouldn’t be subject to annual uprating meaning most of your national minimum wage increase etc is lost.

This type of thing could potentially have real policy implications in Scotland following the further devolution of powers on welfare and the financial framework when its decided.

raising the income tax threshold means less income tax receipts from low earners to the UK government
this also means less spending on some means tested benefits as net income rises for some and this, if i am thinking right, could have implications on Scotland’s budget going forward in relation to devolved powers specifically.

Judy Scott
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Steven
Leaving aside the implications for government income the implications for people who are in work on a very low wage is that the reduction of HB and CTR entitlement together reduce the person’s income for living costs by 85% or 90%  for every extra £1 they earn (or save through the tax changes). And when UC is brought in to change all this - well people may be better off by a few pennies but if the work allowance is never uprated the pennies will be lost as well.
Judy