Tax changes to hit ’18m families’
Eighteen million families will be worse off after the April 2009 budget when temporary tax concessions expire, a study suggests.
According to independent think tank the Institute for Fiscal Studies, they will lose on average £150 per year.
But it points out that 6m individuals will still pay more income tax this year as a result of the abolition of the 10p rate.
And it says that 0.9m families are still worse off overall, including 500,000 single adults under 25, 140,000 childless couples aged between 25 and 55, and 115,000 single adults aged between 25 and 55.
Looking to the future, it points out that 18m families would be worse off in 2010/11, while only 3.6m families would gain, and 10m would be unaffected, if the temporary one-off tax concessions are reversed.
Almost 1 million people are still worse off this year, despite government concessions on the 10p rate.
Pressure to maintain the personal tax allowance in future years could put government finances under more strain.
Growing budget hole
The government has already forecast that it will borrow a record £43bn next year.
It claims that borrowing will begin to fall after that as the economy recovers, but these plans are optimistic, according to the IFS.
The group believes the government will be under strong political pressure to extend its temporary concession for another year, or face millions of angry voters ahead of an election which must be called by May 2010.
“By announcing a big ‘one-off’ increase in the personal allowance this year, Alastair Darling has not only created millions of winners this year; he has created millions of potential losers next year,” say IFS director Robert Chote.
“The government may well be afraid to take their gains away from them. If public sector borrowing ends up permanently higher as a result, it will further undermine the credibility of the government management of public finances.”
Who are the losers?
The IFS says that 21.3m families will be better off this year as a result of the tax and benefits changes announced in the mini-Budget on 13 May, which raised the personal allowance to compensate for the abolition of the 10p tax rate.
But it points out that 6m individuals will still pay more income tax this year as a result of the abolition of the 10p rate.
And it says that 0.9m families are still worse off overall, including 500,000 single adults under 25, 140,000 childless couples aged between 25 and 55, and 115,000 single adults aged between 25 and 55.
Looking to the future, it points out that 18m families would be worse off in 2010/11, while only 3.6m families would gain, and 10m would be unaffected, if the temporary one-off tax concessions are reversed.