Changed Tax Rules Pushing the Poor & Pensioners to Misery in the UK

The poor and pensioners are supposed to lose more than $500 a year due to recent changes in tax rules enforced. These two brackets will not only be hard hit by the changed rules at present but will also find themselves in a intricate cobweb of troubles.

These so called ‘tax credits’ are sure to result into some unfavorable consequences by forcing the poor flocks to bear higher tax burden on their woefully low income and then coaxing them into some laborious chase to get the paid amount back from HM Revenue & Customs. It is not the end of plight for them and the most unintended consequence is getting ensnared into a new kind of poverty traps. It seems that the poor and pensioners are brutally punished for what they have managed to earn and save.

As observed by the institute for Fiscal Studies, all tall talks of the Brown government regarding as to reducing child penury and overall poverty of the low income groups has borne no fruits. In fact, the government’s action is not in keeping with its promise. And the latest blow will lead to a massive figure of those who are already living on a pitifully low income. They will suffer more due to higher marginal rate of tax as compared to the millionaires. More on the platter for the inquisitive readers – this figure is going to almost double up this year!

Due to all these suffocating changes, about 1.9 million people earning just over the threshold of £6,500 will have a marginal saving of £1. Those who are in a whirl of poverty trap will suffer a marginal tax rate of 70 pc.  Let’s us be more precise about the facts and figures. The claimants will suffer loss of 39p for every £1 above the specified income slab. 11pc goes to the National Insurance Contribution if a person is earning more than £6,475 a year which is the current border of personal allowance. And last but not the least, 20 pc income tax is levied for extra earning over the personal allowance level. So, where does the total head to? It is 39pc+11pc+20pc=70pc. It is as simple as that.

The means-tested benefits have been withdrawn from the people whose income exceeds £7,475. Adding to what can be more painful for the not-so-high-heeled groups is personal allowance recovery from those earning even a little extra over £100,000. Every detail unabashedly points out to the misery of thousands of people who suffer more marginal payment of tax for an annual earning of £150,000.

With reforms going on in full fledge to help the millionaires; people with low income or modest saving are counting days when the government will pay attention to their suffering.