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6 April 2017

The winners and losers of April’s tax and benefit changes

Bereaved parents with young children get less, while higher-paid earners keep more. 

By Julia Rampen

In April, the month of sunshine and showers, the fiscal winds change. The government’s tax hikes or cuts start with the new financial year – and so do the benefit cuts that affect some of Britain’s poorest families.

Between April 2016 and April 2017, the Chancellor has changed, and the UK voted for a Brexit likely to have a seismic effect on the economy. But many of the changes arriving this April have been planned well in advance. Many of them come from the Welfare Bill dreamed up in the days of the austerity Chancellor George Osborne, who famously derided those “living a life on benefits”.

So who will be the losers of the spring shake-up, and who wins big? 

Losers

Workers who are sick

Those claiming the work-related activity component of Employment and Support Allowance, a benefit available for those who are unable to work because of sickness, but are expected find work in future, will lose £30 a week

New ESA claimants from 3 April 2017 receive the same payment as healthy unemployed claimants on Jobseeker’s Allowance, or Universal Credit. This is typically up to £73.10 a week. 

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However, there are some small improvements for ESA claimants. Those who manage to undertake permitted work and earn between £20-£115.20 a week will no longer be penalised. 

And if ESA claimants are sanctioned – a controversial tactic of punishing claimants who “break the rules” by witholding payments – they will receive 80 per cent of the current rate, rather than the 60 per cent at present. 

Widowed parents with young children

If losing your partner when you have small kids wasn’t awful enough, from 6 April 2017 the government is cutting the amount bereaved parents can claim in support. 

Families previously benefited from a lump sum, followed by payments until the youngest child leaves school. 

However, while the government’s overhaul will benefit childless widowed partners, who will get a payment for the first time, it now limits payments to 18 months. According to Georgia Elms of the charity Widowed and Young, “many newly widowed parents stand to lose thousands of pounds under the new system”.

Low-paid large families

How many children should you have? Two, according to the government, which has stopped child tax credits for any third (or more) child born on or after 6 April 2017 (there is a similar rule for families on Universal Credit). 

Child tax credits are comparatively generous (paying up to £2,780 a year per child), and provide vital support for low-income families. 

There are some exceptions for the third child rule, such as a mother who has been raped – but the mother would have to “prove” this had happened. Given the low prosecution rates for official rape trials, this has caused outcry, with SNP MP Alison Thewliss describing it as a measure that will bring “trauma and humiliation”. 

Larger families who claim housing benefit will also see a similar cut-off, with only two children taken into consideration when the payment is calculated. 

Stay-at-home parents

Parents claiming Universal Credit – the new, all-encompassing benefit replacing other payments – must start looking for work when their youngest child is three.

New parents

Low-income couples starting a family after 6 April 2017 will no longer be able to claim the family element in tax credits – worth up to £545 a year. 

Unemployed youngsters

From April 2017, in certain areas, Universal Claimants aged 18-21 will have to apply for training, apprenticeships or do a work placement after six months, or lose their payment. They will also lose automatic eligibility for housing benefit. 

Winners

Minimum wage workers

The minimum wage will rise 30p to £7.50 for workers aged 25 or over. For others, here are the new rates:

  •  21 to 24 – £7.05
  • 18 to 20 – £5.60
  • Under 18 – £4.05

However, apprentices must put up with a measly £3.50 an hour.

Higher-paid workers

The personal tax allowance – the amount you can earn before you pay tax – will rise to £11,500 a year. The higher rate tax band has also shifted upwards from £43,000 to £45,000. This means workers earning £43,000 or £44,000 will now pay the basic 20 per cent tax rate on all their income. 

Meanwhile, tax free Individual Savings Accounts (ISA) allowance will go up to £20,000 in 2017-18, from £15,240 in 2016-17. This benefits higher-paid workers the most, because only they are likely to be able to have enough cash spare to max out their savings allowance in the first place.

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