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Single income families forced into higher rate tax bracket

With the upcoming spending cuts and benefit changes already drawing criticism from various concerns, the government has now admitted that a further 15,000 families will be pushed into the higher rate tax band by April 2012, when the changes take full effect.

With many families already feeling the effect of the pinch and finding paying debts increasingly difficult, the news that double income and single income families are to be treated differently, will come as a further blow. For any households where either parent earns more than £43,875, Child Benefit is to be withdrawn but for families where both parents work, providing both individuals remain below the £43, 875 threshold, the benefit will continue. In other words, both parents could earn £40,000 each, giving an household income of £80,000 and continue to qualify for Child Benefit.

Money experts and charities have argued that by calculating benefit entitlement in this way, the government is dissuading individuals to have a successful career and also penalising single-income families who earn the same as a double-income household, but choose to run their family life in a different way.

As well as the changes to Child Benefit, the rules around higher rate tax are also set to change with nearly 190,000 single income families expected to fall into the top bracket, a jump of 9 per cent.

Commenting on the proposed changes, Patricia Mock, a partner at Deloitte specialising in tax, said families would struggle when the new changes are introduced: "Many of them will also suffer from tax credits being withdrawn. Lots of people are going to be very surprised at the amount of tax they are paying." The lone parent charity Gingerbread also agreed that the changes were going to be very difficult adding, "Single parent families depend on only one income and less than half of them receive child maintenance."

 This article was written by Blair Endersby

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