Chancellor George Osborne delivered his first Budget Speech on 22 June. He chose a combination of cuts in expenditure and increases in taxation to tackle the deficit on a broadly 80:20 split. Many of the cuts in expenditure are targeted at welfare benefits and tax credits.
Some of the proposals in relation to tax credits are welcomed although others will be less popular. Reductions for families with household incomes in excess of £40 000 will help preserve the benefits for those with lower incomes. However the reduction in the amount a claimant’s income can increase without any adjustment to the amount of their tax credits from the current limit of £25 000 to £5 000 with effect from April 2013 may create problems with income-related overpayments arising in many more cases. The reduction in backdating from April 2012 to one month will require claimants to react quickly to...
