Families lose £545 tax credits

MILLIONS of middle-class families will lose up to £545 a year under Government plans to slash tax credits, it emerged yesterday.

Nick Clegg has complained that too many benefits are being handed out to middle income households Nick Clegg has complained that too many benefits are being handed out to middle-income households

Deputy Prime Minister Nick Clegg has complained that too many benefits are being handed out to middle-income households “who don’t really need it”.

The Treasury is understood to be preparing to cut the family tax credits from any household with an income of more than £30,000.

That is a far more drastic measure than proposed by the Conservatives at the General Election.

Mr Clegg’s remarks came ahead of the Coalition Government’s emergency Budget next Tuesday, amid warnings that virtually everyone in the country will be affected by tax rises and public spending cuts designed to tackle the Treasury debt crisis.

But concern was growing last night that Middle Britain will once again be forced to bear the brunt of the financial punishment.

Middle-income earners are already braced for hikes in VAT and Capital Gains Tax in the Budget. Any further cuts to their benefits will add to the eye-watering squeeze on already stretched household budgets.

Mr Clegg told GMTV yesterday: “Surely, everyone agrees that having tax credits extended, which is basically a means-tested benefit, to nine out of 10 of every family in this country which has got children means you are giving a lot of money – taxpayers’ money, other people’s money – to people who don’t really need it. We want to taper them away from those families who have much more money.”

He pointed out that the Coalition Government also wanted to raise income tax thresholds so people could keep more of their own money and reform benefits to get people back to work.

The current system enables parents with incomes up to £58,000 – or £66,000 if the child is under one year old – to claim the credits.

Payments can be worth up to £2,850-a-year for families with one child and is paid until the child reaches 16. The size of the payments depends on how many hours a week the parents work, whether they pay for childcare and the number of children.

The tax credits are worth £545-a-year for families with incomes of around £40,000. It is thought that Chancellor George Osborne has agreed to go further in cutting tax credits as a result of the coalition deal between the Tories and Lib Dems.

In their election manifesto the Conservatives argued for a £50,000 income threshold on family tax credits.

But the Lib Dems had wanted the payments slashed for families earning as little as £25,000.

Figures released earlier this week revealed that 13 per cent or £3.1billion a year in tax credits goes to people on above average incomes.

Last night Shadow Work and Pensions Secretary Yvette Cooper said: “Cutting child tax credit for families with a joint income of £30,000 or £40,000 a year will hit a lot of parents who already find themselves over-stretched. 

“Right now that help makes a particular difference to working mothers and in many cases is what helps them afford to work part-time or cover the extra childcare they need. This is not about the richest families, it is about ordinary parents.”

Mr Clegg’s warnings on the benefits system came as he launched a new Government task force aiming to “protect children and everything that benefits children”.

Would you like to receive news notifications from Daily Express?