How Does the 2012 UK Budget Affect Families?

The 2012 UK Budget was announced by Chancellor George Osbourne in March and it brings with it many changes. New budgets are always controversial because they benefit some demographics of people more than others and this year is no exception.

How will the new budget affect the average family in Britain in the coming months and what will it mean for your personal finances?

2012 Budget Changes

Some of the most significant tax changes in the 2012 budget included increases in personal income tax allowance and new rules about child benefits.

Previously, families with at least one parent earning more than £40,000 per year were set to lose their child benefits. However, under the new budget the cuts will only kick in when a member of the family earns at least £50,000 per year. These cuts will not kick in immediately for parents; they will be withdrawn gradually at 1% for every £100 earned over £50,000. As a result, an extra 750,000 people will keep a portion of the benefit and only people who earn more than £60,000 will lose it altogether.

However, the way these benefits work does not accommodate for the cumulative income of a household. For example, a family where one parent earns £45,000 per year and the other earns £15,000 per year has a total income of £60,000 and yet would still receive the standard child benefit of £1,055.60 per year because neither person earns over the threshold.

Meanwhile, in another family only one parent works and earns £60,000 per year. This family would not receive child benefit even though they have a lower total income than the family in the first example. Many families feel that this is unfair because families with higher total income can receive more benefits than a family where only one partner is working.

Working Tax Credit Changes

Another change in this year’s budget is to the working hours rules for Working Tax Credit. Up to 200,000 families throughout the UK could lose £4,000 per year due to the limit on working hours being raised from 16 hours per week to 24 hours per week.

However, the Government has also brought in some changes that it thinks will benefit working families, such as reducing fuel duty and freezing Council Tax. Also, families with children over the age of 16 will benefit from over 40,000 new apprenticeships and more technical colleges being formed.

Do these changes to the 2012 budget make a difference to your family? How will you be affected by the new budget?