After this year’s budget there was a bit of a backlash from stay at home mums (and dads) because of the lack of support afforded one-earner families. The proposal for child care tax breaks for all families apart from one-earners did not go down so well with stay at home parents. However, George Osborne has since promised that an announcement on the long-awaited transferable allowance policy will be forthcoming in this year’s Autumn Statement, ahead of the 2014 Finance Bill. This policy will directly benefit one-earner married families and cannot come too soon. Here are just some of the reasons why:
Is it right that two, two-parent families, each with two children and on identical household incomes should be taxed radically differently because of the choices the parents make about how that income is raised?
CARE’s research shows that a one-earner family on mean average wage (as defined by the OECD, 2011), £34,286, will pay £8,159 in tax. A comparable two-earner couple, by contrast, will not pay nearly as much. For example, if one member of the couple is on £20,572 (£395 per week) and the other is on £13,714 (£263 per week), then together they will pay £5,544.87 in tax. The simple truth is that one household with the same number of adults and children as the other will pay £2,1614.13 more in tax just because one parent stays at home to look after the children! Is that right?
Moving to one-earner families on £60k, the income level where child benefit is lost, the difficulties become even starker. A one-earner couple with two children on an income of £60,000 will pay £13,950 in tax. A comparable two child, two-earner couple family, each earning £30,000, meanwhile, will pay £8,768. After the Higher Income Child Benefit Charge is added, the one-earner couple's tax bill rises to £15,667. This is £6,899 more than that of the two-earner couple. Put another way, a one-earner family with two children and on an income of £60,000 already pays 59% more tax than a comparable two-earner couple, each earning £30,000. With the introduction of the HICBC, the one-earner couple will pay 79 per cent more tax.