500,000 working families lose £1,000 a year in tax credits under coalition

500,000 working families lose £1,000 a year in tax credits under coalition

New research from the TUC shows that at least half a million working families a year will lose more than £1,000 as a result of technical changes to tax credit allowances set out in last month’s .

Currently tax credit entitlements are calculated on a household’s previous year’s income. If a family’s earnings fall during the course of a year — for example due to unemployment, illness, a family break up, retirement, bereavement or a household member losing working hours — their annual tax credit calculation is adjusted to take account of their new income.

However, changes announced in the June Budget mean that from 2012-13 households receiving tax credits who see their wages fall during the year will have the first £2,500 of income they lose disregarded when their new in-year tax credit entitlement is calculated.

The Treasury expects the change will save the government around £550 million a year.

TUC General Secretary Brendan Barber said: “In his Emergency Budget speech the Chancellor promised not to hide any hard choices from the British people or bury them in the small print of the Budget documents.

“But this cut in tax credit entitlements was hidden in the detail and will make a real difference to some of our poorest and most vulnerable families, costing at least half a million households a year more than £1,000.

“This is another reminder that we are very definitely not all in this together. While the rich have been let off the hook, those on middle and low incomes are being left to pick up the cost of the recession.”

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