Tax credit changes: the impact on working mums

A large number of working mums will be affected by the cut in tax credits, according to a Workingmums.co.uk poll.

Some 62% of mums said they would be affected by the cuts announced in the Budget. A quarter of the 71 mums questioned said they would not be affected and 13% weren’t sure. One said: “I could not afford to pay my rent if I did not have help from tax credits as I only earn £800 plus £82 child benefit per month and my rent is £476, council tax £90, water rates £42, telephone £31, food £180, tv licence £14 and then gas & electric leaving me nothing for clothes or emergencies or shoes for my child or school trips/uniforms.” Another stated: “As I am not in employment at the moment due to back injury and having had four children, funds are difficult on a daily basis. I am unable to pay for childcare and I am a single mum. I also have other health issues related to my back injury. I am trying to do a short course to retrain to find employment, but it would not cover my expenditure.”

The Chancellor announced earlier this month that tax credits used to cover expenses such as childcare would be among working-age benefits that would be frozen for four years. He said that in the future parents would only be able to claim tax credits for two children. The restrictions apply to children born after April 2017.

In addition, he said the income threshold for tax credits would be reduced from £6,420 to £3,850, with similar reductions for Universal Credit work allowances. He added that the rate at which a family’s tax credit is reduced as parents earn more would be increased to 48% with the income rise disregard being reduced from £5,000 to £2,500. Tax credit payment is linked to estimated income for the following year and income disregard is the amount above that rise that is effectively written off.

The cuts are part of the Welfare Reform and Work Bill, which passed through the Commons earlier this week by 308 to 124 votes. It also includes a significant lowering of the benefits cap. Labour’s acting leader Harriet Harman advised its members to abstain and, when this brought critcism, she reached a compromise deal, securing an abstention from many Labour MPs in return for a “reasoned amendment” opposing some of the bill’s measures.

The Institute for Fiscal Studies says some 13 million families will lose an average of £260 a year as a result of the benefits freeze and three million could lose an average of £1,000 a year due to tax credits changes.

The government says tax credits have meant that it has ended up subsidising employers and enabling them to pay low wages. The Chancellor announced plans to effectively raise the minimum wage for people aged 25 and over to £7.20 an hour from next April which he said would rise to £9 an hour by 2020. The IFS says even if wages rise people on tax credits would be “significantly worse off” after the Budget.

Simon Hopkins, Chief Executive of Turn2us, a charity which helps those on low incomes access support, said: “The proposed Welfare Bill sets out a number of polices that we fear may harm some of the very poorest in society. As the bill goes through the committee stage in parliament I would urge those of all sides of the house to consider the drastic impact cutting the income of families and individuals struggling to get by.

“As a charity fighting to combat poverty in the UK we will play our part in raising awareness the impact that these changes may have on those that we support so that the appropriate amendments can be made to protect those needing support.”

Turn2us.org.uk has an online caculator which helps people work out what benefits and tax credits they might be entitled to.

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