Tuesday, 2 April 2013


Press release
Sunday 31st March 2013
For immediate use

Families are £891 worse off in new tax year, new figures show

Families will be an average of £891 worse off in the new financial year starting next week because of tax rises and cuts to tax credits and benefits introduced since 2010, according to Labour analysis of figures published by the independent Institute for Fiscal Studies (IFS).

Taking into account all changes to tax, tax credits and benefits that have been introduced since 2010, households in the UK will on average be £891 a year, or £17 a week, worse off in the 2013/14 financial year.

The analysis is based on figures published by the IFS in its Green Budget in February and its post Budget briefing earlier this month.

Ed Balls MP, Labour’s shadow chancellor, said:

“These shocking figures show the huge hit millions of families are facing at the very same time as David Cameron and George Osborne are giving millionaires an average £100,000 tax cut.

“On average families will be £891 worse off this year because of changes introduced since 2010. All this comes at a time when a flatlining economy has seen prices rise faster than wages and unemployment rise again this month.

“And while Ministers trumpet the small rise in the income tax personal allowance, they should admit that it is hugely outweighed by things like cuts to tax credits and child benefit, higher VAT, the bedroom tax and the granny tax. They are giving with one hand, but taking away much more with the other.

“It cannot be right to force millions to pay more while millionaires pay less. This is the week when the whole country will see whose side David Cameron and George Osborne are really on and who is paying the price for their economic failure.”

Underneath the average figures, some families face particularly harsh hits from changes being introduced next week.

From Monday 1 April changes to council tax and housing benefit will mean:
  • 2.4 million families on low incomes will pay on average £138 more in council tax in the year 2013/14, as a result of cuts to council tax benefit, according to the Joseph Rowntree Foundation.
  • 660,000 people will lose an average of £728 per year or £14 a week as a result of the ‘bedroom tax’, according to figures from the IFS. 
From Saturday 6 April changes in the new tax year include:
  • the top rate of income tax will be cut from 50p to 45p. This will benefit 267,000 people earning over £150,000, including 13,000 people earning over £1 million who will receive an average tax cut of £100,000, according to figures from HMRC.
  • child benefit will be frozen for a third year, while tax credits and other working-age benefits will be increased by just 1 per cent. These real terms cuts will affect 9.7m households, of which 7.3m (or 75 per cent) are working households according to the IFS. 
  • the personal allowance for those aged under 65 will rise to £9,440 but the higher rate threshold will fall to £41,450.
  • changes to the age-related allowance – the so called ‘granny tax’ – will see 3.6m pensioners lose £68 a year and 360,000 people turning 65 this year lose £268, according to the IFS.