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Benefits cuts on their way

Changes and cuts to the welfare benefits system and increases in Value Added Tax (VAT) were among the changes announced by the Chancellor, George Osborne, in his emergency Budget recently. Most people will be affected by the Government's plans, making it critical for all people on low incomes or in financial need to claim any benefits or Tax Credits they are entitled to.

Benefits cuts and changes

• With the exception of the State Retirement Pension and Pension Credit, the amounts paid in benefits will rise next year in line with the Consumer Prices Index (CPI) rather than the Retail Prices Index. This will save £6 billion a year by the end of Parliament because the CPI does not include housing costs.
• The cost of Housing Benefit will be cut by 7% (£1.8billion a year by 2014/2015) by setting maximum limits and other changes.
• Disability Living Allowance claimants will have to have medical assessments from 2013.
• Child Benefit will be frozen for three years.
• The Health in Pregnancy Grant will be abolished in April 2011.
• Parents will only be able to claim Sure Start Maternity Grants for their first child.

VAT changes

The standard rate of Value Added Tax (VAT) will rise from 17.5% to 20% from 4 January 2011.

The items you don't pay VAT on, including books, food and children's clothes, remain unchanged.

Personal allowances

The tax-free personal allowance for people aged under 65 years will rise to £7,475 from April 2011. This is part of the measures announced in Chancellor George Osborne's emergency Budget. This will mean many people on low incomes will not have to pay income tax at all. However the threshold at which incomes attract the 40% tax rate, currently £43,875, will fall, so that many more people will be paying this higher tax.

Use our Benefits Checker to check your client's benefits entitlement

Date of publication: 10 July 2010