Saturday, 5 September 2015

The End of Working Tax Credits.

From the BBC:

... the income threshold for tax credits is to be reduced from £6,420 to £3,850. So, from April 2016, anyone earning more than £3,850 a year will have their Working Tax Credit reduced more steeply.


Gordon Brown always used to boast that the Working Tax Credit was worth £x to the individual if he worked 30 hours a week, but that was always a lie - if you worked 30 hours, then your income was so far above the threshold of £6,420, most of that promised £x would be clawed back.

Boy George has just taken this twisted logic to extremes and extended it to the 16 hour credit as well (Gordon Brown and Boy George are very similar in many ways).

So here goes:

After April 2016, you work 16 hours a week, so you are notionally entitled to the basic amount of £1,960.

16 hours x 52 weeks x likely NMW £7.20 = £5,990

That is £2,140 over the £3,850 threshold, so your £1,960 is reduced by 41% of £2,140, i.e. down to £1,082. Under the old rules, you would have kept the full £1,960.

If you are on 30 hours a week, you are notionally entitled to the £810 extra WTC = £2,770

30 x 52 weeks x £7.20 = £11,232

£11,232 - £3,850 = £7,382. £7,382 x 415 = £3,027, so your notional entitlement of £2,770 will be reduced to zero. But you can bet that officially, the 30-hour credit will still exist.

If you earn a bit more than the NMW, about £10 an hour (which is still very low paid), then you get precisely nothing in WTC.

So as shit as the whole Tax Credits system was and is, this just increases overall marginal tax rates i.e. reduces the incentive to get a job. In other words, it makes it even shitter.

H/t @JMchools


JuliaM said...

That's Dave for you, determined to do better than Brown at.... err...


Bayard said...

I get the feeling the Tories like having lots of unemployed people. They encourage the others and act as a handy blame sponge. If we had no unemployed or immigrants, they might have to blame our economic ills on the people who actually caused them and that would never do.