HM Treasury written question – answered at on 1 March 2016.
To ask Mr Chancellor of the Exchequer, pursuant to the Answer of 5 January 2016 to Question 20332, if he will place in the Library all case studies his Department undertook for the purpose of establishing the effect of reducing the income rise disregard for tax credits.
To ask Mr Chancellor of the Exchequer, with reference to paragraph 1.122 of the Spending Review and Autumn Statement 2015, what estimate his Department has made of the average change in tax credit award as a result of reducing the income rise disregard for tax credits.
To ask Mr Chancellor of the Exchequer, with reference to the Government's memorandum submitted to the Lords Secondary Legislation Committee on 28 January 2016, what the evidential basis is for the statement that there will be no cash losers from the reduction of the income rise disregards for tax credits.
As announced in the combined Autumn Statement and Spending Review, the amount by which a tax credit claimant’s income can increase within the year before their tax credit award is adjusted (the income rise disregard), will be reduced from £5,000 to £2,500. The reduction to the income rise disregard will stop one family receiving a higher tax credit award over another family with precisely the same income and the same circumstances, which makes the system fairer. The household income of families before it rises will inform how they might be effected by a reduction in the income rise disregard.
The only people who will be affected are those who will see an income increase of more than £2,500 in-year.
Due to the way that tax credits are calculated, the amount an award will be adjusted by – because of an increase in income – will depend upon a claimant’s individual circumstances, such as the household’s income before it rises. No one will be a cash loser because their income will have increased. As an example, for an individual with a wage of £12,000, an income increase of £2,501 would lead to an adjustment in their tax credit award of just 41 pence. An increase of less than £2,500 would see no change at all.
Yes1 person thinks so
No0 people think not
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