Are tax credit cuts taxing?

Posted by Rachel Giles on

In order to cut Britain's welfare bill by £4.4 billion, the government are proposing a series of cuts in tax credits. Tax credits small amounts of funding, paid out by the government, to supplement lower income families.

Nearly 40% of working British families with children are relying on tax credits, and in Southampton Test, it is estimated that 57% of families are receiving tax credits. Opponents of the reforms claim that the changes will affect the poorest families the most, with around 4.6 million families losing an average of £1,300 next year, 3.3 million of which are working families.

There are an increasing number of families divorcing or separating each year, and a large proportion of these will be further affected by the tax credit cuts at a time that they are already financially strained.  Further changes that will affect families with more children, is that where currently the system pays up to £2,780 per child for an unlimited number of children, in April 2017, the system will pay up to £2,780 per child for only two children. Using these figures, it can be calculated that where currently a family with five children would receive a maximum of £13,900, from 2017, the same family could only claim a maximum of £5,560. Such a huge difference is bound to have an impact on families, and the Resolution Foundation are predicting that 200,000 more children will fall into poverty immediately after the cuts, with this number rising further in 2020.

In a separation setting, the impact is often most felt by children. Coupled with tax credit cuts, I think we may see an increase in poverty and mental health issues among young people. Society should be careful to protect its children.

I was assisted in the research and writing of this by our work experience student, Megan Price.

About the Author

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Rachel is a Senior Solicitor in the Family team and is based in the Southampton office.

Rachel Giles
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