April tax changes spell bad news for families

Tax magnified

The charity Credit Action is warning households to prepare for more belt-tightening in the new tax year. The charity has identified 45 tax changes that will implemented in April, leaving a typical family £200 worse off.

Families in the 'squeezed middle' – earning just above the higher rate tax threshold - are most likely to feel the pinch on the back of rising national insurance contributions, a reduction to the higher rate tax threshold and sweeping changes to child tax credits. Child benefit will also be frozen for three years before being removed from 40% taxpayers in April 2013.

All 29 million employees in the UK will have to pay an extra 1% in national insurance contributions. Currently higher earners – earning more than £844 a week – have to pay an additional 1% but from April this will increase to 2% on all workers earning £817 a week or more.

The changes

One of the most significant changes is the drop in the higher rate tax income threshold from £43,875 to £42,475, which will see an additional 750,000 people begin paying tax at 40%.

Fuel duty will also go up by 1p per litre above inflation and the consumer price index will now be used to measure all benefits, tax credits and public sector pensions. Previously benefits increased in line with the retail price index, which is higher than CPI, meaning benefits will now increase at a lower rate.

This is on top of losses being felt by the change in VAT to 20% in January which the Institute of Fiscal Studies says amounts to £480 per household.

Rising energy and food prices and fears over potential interest rate rises and further job losses are also putting more pressure on families.

This research from the INS Green Budget says the planned cut in total public spending over the five years from April 2011 will be larger in real terms than the UK has seen in any five-year period since the end of the Second World War.

Joanna Parsley, associate director of Credit Action, says there is no way to avoid these changes.

"It is vital that with under a month to go until these changes take effect everyone looks to revisit their finances and get them in order" she adds.

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Your Comments

Even less money in my pocket, thank you Labour, lets hope they never get voted into government again, if they did they will probally bankrupt the country totally.

An interesting article??

Great Britain PLC is simply a large business that can no longer afford to maintain the lifestyle that that many people have become accustomed to. It's time to tighten our belts.

Yes, more people will enter the 40% tax bracket but they will only pay 40% on their earnings over the threshold.

Taxe rises, whether direct or stealthily applied, are necessary to get the country back on track. National Insurances contributions to rise - Which of us doesn't have a reason to thank the NHS for treatment? Aren't we looking forward to receiving our state pension?

HEADS UP - These things need to be paid for!

FYI, I'm a truck driver working 6 days and earning £22k who is struggling to pay my mortgage with all my living costs spiralling. I didn't expect a pay rise and know that things must get worse before they get better.

Knuckle down, tighten your safety harness and get ready for a bumpy ride.

Why is everything about families what about single people?

Why can't the goverment use some of their OWN money as it was them claiming extras and the heads of many banks that got us in this mess in the first place, also an idea is to take some of the MILLIONS that footballers earn to help get us out of the debt, it's not as if they would miss it (like the many average people who have lost their jobs and the poor would).