UK Lib Dems To Scrap Tax Credits For High Earners

by Robert Lee, Tax-News.com, London

09 February 2009

The Liberal Democrat Party, a UK opposition party, is set to unveil new proposals to curb tax credit payments to those with higher incomes as part of plans to make GBP7.5bn in savings for the taxpayer.

Lib Dem leader Nick Clegg wants to reduce or abolish tax credit payments to those earning more than the GBP24,000 per year average annual salary in the UK to release more money to fund the education system. He also wants to end the so-called Child Trust Fund, which gives GBP250 to every 18-year-old.

Arguing that the current economic conditions demand less profligacy from government, Clegg said that removing entitlement to tax credits for those higher up the income scales would be "entirely justified" because they were introduced to help those on low incomes.

Generally, tax credits are available to supplement the income of households earning less than GBP17,400 annually. However, they also benefit working parents with considerably more income. For example, a couple with three children working full time and earning about GBP25,000 a year would get about GBP55 a week in tax credits. If their income was higher, and they earned about GBP50,000 a year, they'd get about GBP10 a week, according to HM Revenue and Customs.

The party has calculated that curtailing entitlement to tax credits would save more than GBP3bn in public spending.

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