The sneaky cut to Tax Credits for the disabled (It’s hidden in the calculations)

Chancellor-of-the-Exchequer-George-Osborne

Single disabled people to lose money due to a change in the way that Tax Credits will be calculated from April 2016

Disabled people are allowed to work 16hours per week and claim Tax Credits

A disabled person working 16hours a week and earning £8 per hour by my calculations will be £24 a week worse off.

Tax Credits are not easy to calculate and most people will check to see that the information they have sent in is correct and the Tax Credit Office will calculate the rest

A main factor in calculating Tax Credits is the level of money that can be earned before being reductions are made.

From April 2016, the level at which a household’s tax credits are withdrawn for every extra pound earned will be reduced from £6,420 to £3,850.

The Taper which reduces amount of Tax Credits by 41pence for every £1 of income above a certain level) is increasing to 48%

What does this mean?

My calculations are based on a person working 16hours a week and earning £8per hour giving a total income of £6656pa
George Osborne has cut the allowance allowed in tax credits from £6420 to £3850 – think of this figure as you would your tax allowance

Using the pre April 2016 allowance of £6420 (taken away from your annual income of £6656) -would leave £236

Again think of  tax allowances and this £236 would be the amount that tax is paid on (know as the threshold figure)

Entitlement to Tax Credits is tapered away at the rate of 41 pence for every £1 of income above the threshold figure.

This gives the income excess amount of £96.76 which is deducted from allowances for a single disabled person, which in this case is £4936

We are then left with an annual Tax credit figure of 4833.24

Giving a weekly total of £92.69

From April 2016

Using the new allowance of  £3850 (taken away from your annual income of £6656) – would leave £2806

Again think of tax allowances and  £2806 would be the amount that tax is paid tax on (know as the threshold figure), but now instead of having £236 to pay tax on the figure leaps to £2806  

Entitlement to Tax Credits is tapered away at the rate of 48 pence for every £1 of income above the threshold figure. (2806 divided by 48%)

This gives the income excess amount of £1346.88 – a massive increase which is deducted from allowances for a single disabled person, which in this case is £4936

We are then left with an annual Tax credit figure of £3583.12pa

Giving a weekly total of £68.71

So a disabled person who works 16hours per week and earns £8per hour is going to be worse off by £24 per week.

 Because of the complicated way that Tax Credits are calculated most disabled people will not even realise that anything has changed ——- until they receive their new Tax Credit Award for 2016 –

 A truly sneaky, underhanded move by George Osborne!!!

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4 Comments

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4 responses to “The sneaky cut to Tax Credits for the disabled (It’s hidden in the calculations)

  1. Pingback: The sneaky cut to Tax Credits for the disabled – Telling It As It Is | Vox Political

  2. Ronnie Maxwell

    Thank goodness as a Disabled Person only able to work about 16-20 hours a week I am now off Tax Credits. This was done by shere hard work (being self-employed) and a lot of pain (my medical spinal cord condition is VERY PAINFUL one) and managing to improve the profits of my small business. At first (when coming off tax credits), I was no better off financially (or so it seemed to appear) but over time, I have taken great pride in what I have managed to achieve and I hope my business will remain profitable enough, so that I never have to claim tax credits again!
    12 years ago, when I was struck down with my debilitating spinal cord problems, I was pretty much written off and advised to sign onto “Incapacity Benefit”, ……which I never did. I kept my self-employed status and my tax credits (for a while) were “my lifeline” (to finacially provide for my family). I am very disappointed by the Chancellor quietly cutting the tax credits for the disabled but in the same token, I think there are 10’s of thousands of “so called disabled” claiming Incapacity Benefit, saying they are incapable of work (and have become insitutionalised into this state of mind), when in fact they might be able to work in one form or other. I had to dramatically “change direction”, work-wise once my condition hit me and other need to “think outside the box too”! These capable of some form of work need to come off the benefits system and the only way to do so is to encourage & support them doing so. Penailising them financially is NOT GOING TO HELP!
    I fully understand why the government have to reduce the size & the culture of the Benefits system but the Tax Credit top ups for the disabled were a helpful carrot to help persuade people to come off the long term “signed off” Incapacity Benefit register, Why is the Government shooting itself in the foot with this new policy?

  3. Richard Bowen

    Yeah, basically I figured that these changes are effectively a cut of 50% in what is paid out in Working tax Credits. Although I don’t think it’s difficult to figure out – you just need to know how the basic calculation works, which of course tends to be kept out of the light.

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