Middle-income households face ‘double whammy’

By politics.co.uk staff

Middle-earners face a ‘double whammy’ as they are both pulled into the higher income bracket and subsequently lose their child benefits, Labour has claimed.

According to the Institute for Fiscal Studies, up to 75,000 taxpayers will be included in the 40p tax bracket tomorrow, as the threshold is lowered to include anyone earning £42,475 or above.

From 2013, this group will also lose their child benefits once the government scraps the payment for any families on the higher tax rate.

Labour said 160,000 households currently eligible for child benefit will enter the higher rate tomorrow, along with 20,000 single-income families. They will all lose their child benefits in two years time.

Labour figures show that a family with three children would lose almost £2,500 in child benefit.

Child benefit will also be frozen for three years, which Labour claims will cost families with one child at least £130 a year, while a family with three children will lose £301 a year.

David Hanson, shadow Treasury minister, accused the government of “giving with one hand while taking lots more away with the other”.

“Tens of thousands of families on middle incomes face a double whammy from the Conservative-led government’s stealthy tax rise,” he said.

“Ministers claim they’re reducing income tax a little for those on lower incomes, but they’re actually just giving with one hand while taking lots more away with the other.

“The Treasury’s own figures show that a family with children will pay an extra £450 more on average each year because of the Tory VAT rise. And that’s before their cuts to tax credits, cuts to childcare support and a three-year child benefit freeze.”

Last October, George Osborne announced child benefit would be cut for families of a higher tax rate.

“These days we’ve really got to focus the resources where they are most needed. We’ve got to be tough but fair,” the chancellor said at the time.

“That’s why we will withdraw child benefit from households with a higher rate taxpayer.”