An insight into income!

The most recent Sunday Times Magazine explored how household income will be affected by tax and benefit reforms between 2010 and 2014, revealing some interesting statistics:

The majority of the population (12m people) earn £10,000 - £20,000 per annum, with 6.9m earning £20,000 - £30,000 and 5.3m £30,000 - £50,000. Unsurprisingly, those earning in excess of £1m per annum are in the minority, accounting for just 14,000 people.

Figures for the South West region further reflect these stats, with 590,000 people earning £20,000 - £30,000, 441,000 £30,000 - £50,000 and 98,000 employees falling within the £50,000 - £70,000 earnings bracket.

The reduction in household income will fall anywhere between 4.71% and 7.02%, with those earning the most losing the most: a household with an average income of £15,932 will be £1,113 worse off, whereas a household with an income of £98,258 will lose £6,896 per annum.

What has changed?

• Firstly, the VAT rate has already seen an increase of 2.5%, standing at 20%.
• Entering the new tax year, the threshold for earning the higher rate of tax (40% of earnings) reduces from £43,875 to £42,475. Those falling into the higher tax bracket will lose their child benefit entitlement from 2013.
• The government has also decided to cut tax credits and eradicate Education Maintenance Allowance.
• Interest rates are also predicted to rise at some point this year

The article suggests that these measures have the potential to harm the Conservative party, with a recent Times poll favouring the Labour party. It appears that many of the 'squeezed middle class' are taking the impact on their lifestyle, continuing to limit or cut the luxuries in a bid to retain funds for the essentials.

[Source: The Times Magazine 16.1.11]