HARD-WORKING Brits on Universal Credit have a bigger chunk of their income taken away than those on seven-figure salaries.
Those on million pound salaries get to keep 54p from every £1- but if you're on Universal Credit you are just 37p better off.
That's because of the way the benefit works. If you're on Universal Credit you have 53p from every £1 you earn – known as the taper rate – over the work allowance deduced from your benefits payment.
The work allowance you get is based on if you have children, are in a couple or get help with housing costs.
It means that hard-working people on Universal Credit have their payments slashed, effectively paying a tax on earnings, as we've highlighted in our Make Universal Credit Work campaign.
We want the government to increase the work allowance and lower the taper rate.
The benefit is leaving hard-working Brits penniless, like Roxy Thobald, who despite working 20 hours a week, fed her seven-year-old daughter Bella leftover party food because she had no cash due to Universal Credit's harsh taper rate.
Or single mum Gemma Hickman who is studying to be a physiologist and works 20 hours a week but can't afford present for her kids this Christmas.
Sara Willcocks, from poverty charity Turn2us, said: “Universal credit just isn’t working for low income families. How can it be when people earning low wages have more deducted from their incomes than millionaires?
The Sun wants to Make Universal Credit Work
UNIVERSAL Credit replaces six benefits with a single monthly payment.
One million people are already receiving it and by the time the system is fully rolled out in 2023, nearly 7 million will be on it.
But there are big problems with the flagship new system – it takes 5 weeks to get the first payment and it could leave some families worse off by thousands of pounds a year.
And while working families can claim back up to 85 per cent of their childcare costs, they must find the money to pay for childcare upfront – we’ve heard of families waiting up to 6 months for the money.
Working parents across the country told us they’ve been unable to take on more hours – or have even turned down better paid jobs or more hours because of the amount they get their benefits cut.
It’s time to Make Universal Credit work. We want the Government to:
- Get paid faster: The Government must slash the time Brits wait for their first Universal Credit payments from five to two weeks, helping stop 7 million from being pushed into debt.
- Keep more of what you earn: The work allowance should be increased and the taper rate should be slashed from 63p to 50p, helping at least 4 million families.
- Don’t get punished for having a family: Parents should get the 85 per cent of the money they can claim for childcare upfront instead of being paid in arrears.
Together, these changes will help Make Universal Credit Work.
Join our Universal Credit Facebook group or email [email protected] to share your story.
"Our welfare safety net is broken. The next government needs to make fixing Universal Credit an immediate priority if they plan to tackle in-work poverty.”
But how does it work? If you're a million pound earner, then you'll end up paying 45 per cent tax plus national insurance, meaning you get to keep a bigger chunk of your money after tax.
Everyone can earn up to £12,500 tax free before income tax kicks in.
Rachel Griffin, tax expert from Old Mutual Wealth, said:
“Depending on your income you get taxed based on the amount you earn.
“So if you earn over £15,000 and under £50,000 you get taxed at 20 per cent.
"But if you earn over £150,000 a year then you pay 45 per cent tax.
“You also need to factor in national insurance contributions too.”
While Sarah Coles, personal finance analyst at Hargreaves Lansdown, added: If you have a £1 million salary in England and Wales, you’ll take home £546,645 a year – which is an effective overall tax rate of just over 45 per cent."
A DWP spokesperson said: “Universal Credit encourages people to take on more work by tapering off as they increase their earnings.”
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