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From April 2016, the level at which a household’s tax credits are withdrawn for every extra pound earned will be reduced from £6,420 to £3,850.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