Sweeping changes to the tax and benefits systems which come into force at the start of the new tax year will leave the average household around £200 worse off.
A total of 44 tax and benefit changes will be introduced on April 5, ranging from a reduction in the threshold at which people start paying higher rate income tax, to a 1 per cent National Insurance hike.
Financial education group Credit Action says 26 of the changes will have a negative impact on people’s pockets, with only 13 having a positive one, while other changes will have a mixed impact.
One of the biggest changes being introduced is the Government’s decision to reduce the threshold at which people start paying income tax at 40 per cent to £42,475.
The Institute for Fiscal Studies estimates that the move will drag an additional 750,000 people into the higher rate income tax band for the first time.
But around 500,000 people will be lifted out of paying income tax altogether, as a result of the £1,000 increase in the amount they can earn before they have to start paying tax, with this threshold rising to £7,475 this year and £8,105 next year.
The main rate at which National Insurance is paid is being increased from 11% to 12% from the start of the new tax year, while the higher rate will rise from 1 per cent to 2 per cent, although the level of earnings on which people have to pay National Insurance is being increased from £110 per week to £139.
Taken together, the changes to the income tax and National Insurance system will help low earners, leaving someone on £7,475 a year £275 better off.