Wednesday 16th March 2011 The UK's working population could be in for a financial shock at the beginning of next month.All 29 million workers will be stunned by changes to tax and benefits, according to new reports.The charity Credit Action has identified 45 tax and benefit changes, which will take effect on April 6, in its latest report.Many households will be hundreds of pounds a year worse off, with better-off families being hit the hardest, according to figures calculated by the Institute for Fiscal Studies (IFS).The average loss to families will be £200 a year, which comes after changes in January which saw a rise in VAT, accounting for a total of £680.The biggest change for most people next month will be income tax. Calculations suggest 750,000 more people will pay tax at the higher rate of 40 per cent because the higher rate threshold has fallen from £43,875 to £42,475.Speaking to DMT, Credit Action’s Joanna Parsley said: "If you don't think about the changes until April, you might be in for a bit of a shock, as 45 major changes will come into play and these will affect everyone- there really is no way to avoid them. “Over a million people will be affected by the changes to tax, as according to the IFS, 750,000 people will become higher rate tax payers and 500,000 will stop paying income tax.” As far as National Insurance contributions are concerned, all 29 million employees in the UK will pay an extra 1 per cent, rising from 11 to 12 per cent.But higher earners are not exempt from rate increases.Until recently, employees had to earn over £844 a week to pay an additional rate for higher earners. However, from April 6, anyone earning more than £817 a week will pay, with the contribution rate doubling from one to two per cent.Taking both the tax and NI changes into account, the IFS estimates than anyone earning more than £35,000 a year will be worse off.In addition to tax and national insurance, there are changes to working and child tax credits. Child benefit will be frozen for three years, before being phased out for many families in 2012.Child tax credit will be reduced for some, with the baby element removed altogether.As if the tax and benefit changes were not difficult enough, millions of households are also being squeezed by inflation.The rise in VAT to 20 per cent in January has had a knock-on effect on inflation, hitting restaurant bills, new cars and alcoholic drinks.The price of petrol and diesel has risen dramatically, with the duty still due to rise by 2 per cent above inflation in the forthcoming budget.Joanna continued: “Combined with the changes to National Insurance it’s vital that we all check our payslips closely to see how the changes have impacted on our take home pay.“Although not all of the 45 changes will have a detrimental impact, changes to tax and welfare benefits coupled with rising energy and food prices, and fears over potential interest rate rises and further job losses, mean that household budgets in 2011 will continue to be squeezed.Joanna had some words of warning for those concerned about the changes.“It is vital that with under a month to go until these changes take effect everyone looks to revisit their finances and get them in order. Budgeting is key and the easy to use interactive Credit Action Budget Builder allows everyone to budget simply and easily,” she said.On a positive note, half a million people will be taken out of the tax bracket altogether. That is because the amount anyone is allowed to earn before paying tax rises from £6,475 to £7,475.
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