CSR 2010: Tax Credit cuts for working families
The technical wording of one of today’s Tax Credit changes is as follows: “increase working hours requirement for couples with children to 24 hours”. No further detail is yet available on who is affected by this change, but is appears that the change will mean that couple households (not lone parent households) with one partner working 16 hours, and one not working or working less than 8 hours, will now lose their Tax Credit entitlements unless the household can increase its working time.
This is a significant cut for affected families. Working Tax Credit is made up of various elements which include (for those on maximum entitlements – the lowest income working families) £1,920 basic element (annual), £1,890 couple and lone parent element (annual) and childcare costs currently worth (although soon to be cut) up to 80 per cent of £300 (£240) a week (although it is important to note that entitlement to the childcare element requires both members of a couple to be working 16 hours, so any couples already claiming this element will not be affected by the change in the hours rule as they will already be working in excess of 24 hours between them).
Will people be able to increase their hours? There is certainly a large financial incentive to do so. But with close to 2.81 million people already in underemployment it is hard to see how working more hours will be possible for all families.