Above inflation pay rises not making low income families better off – Tax and Family say

If you are one of the lucky ones whose wages have gone up by 7.8% – not everyone’s have – this  does NOT mean that that you are slightly better off than a year ago!  You will more likely be worse off! 

A 7.8% increase in wages does not mean that the money you have to live on has increased by 7.8%. Tax and national insurance will reduce the pay rise to pay rise to 5.3%. If you are one of 2 million people who both pay tax and claim universal credit the increase in your wages will reduce your universal credit and the 7.8% wage increase will only increase the income you have to live on by 2.4%. If bills are rising by 7.8% you are worse off than a year ago.

 With inflation at 6.7% a basic rate payer needs a  pay rise of over 9% to be better off than a year ago. If claiming universal credit a basic rate taxpayer would need a pay rise of over 20%.

 Why? This is because of our crazy tax and benefit system. It starts by taking money away from low income households and then gives it back to them with strings attached.