Tax reforms won’t help UK low-earners: Report

Tax reforms won’t help UK low-earners: Report

Sat Dec 27, 2014 9:19AM GMT

A UK report says up to 3.3 million British low income families will not benefit from the Coalition government’s proposed tax cut due to a cap on work allowance.

The study conducted by the think tank Resolution Foundation and published by The Independent on Friday said gains from the proposed tax reforms will be wiped out by cuts to benefits for low income families.

The foundation analyzed Chancellor George Osborne’s decision to freeze the country’s Universal Credit work allowance until 2018. The allowance is the amount Britons who receive benefits and tax credits can earn before their in-work state support begins to drop.

According to the foundation, the freeze would negate 65 pence for every pound in proposed tax cuts by the country’s three mainstream parties.

The report said a British couple with children would need to raise their combined earnings by more than £1,300 just to wipe out the income lost from the freeze.

The think tank called for changes to the Universal Credit, an overall benefit created by merging six different benefits and tax credits, to guarantee that all UK households receive the full value of the proposed tax reforms.

In addition, the think tank warned that one of the key aims with the Universal Credit, which is improving the incentive to work for Britons on benefits, would be eroded by the government’s high marginal tax rates. According to the report, Britons will lose 76 pence of every extra pound they earn under the scheme.

The current coalition government launched austerity measures when it came to power in 2010 in a bid to tackle the country’s mounting debt and sluggish growth, but the policies have sparked opposition and public protests in recent years.

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