Government cuts to hit families by £2.3bn in April

The month of April is bringing with it several changes in tax, allowance and benefits that are set to hit all families one way or the other.


The month of April is bringing with it several changes in tax, allowance and benefits that are set to hit all families one way or the other.

Housing benefit will change and include penalties for those who have excess rooms in their property. This 'bedroom tax' will cost UK households £490 million, according to the Child Poverty Action Group (CPAG).

Council tax benefits have been cut by ten per cent, costing £485 million, while the local housing allowance annual changes will leave families £90 million out of pocket.

Working age benefits as well as tax credits have had their uprating capped at one per cent, which means households will lose out on £505 million, and the tax credit disregard for in-year increases has been reduced to £5,000 – costing £455 million.

This month also sees the introduction of the benefits cap, which will result in £290 million leaving the pockets of the most vulnerable families, according to CPAG.

The overall total of £2.3 billion represents how much is cut from the support given to low income households compared to 2012-13. CPAG claims the majority of these cuts will impact the finances of families with the lowest income.

Personal tax allowance will be increased in April but the charity believes this does not benefit low income households much, instead having more of an impact on better off individuals.

As the working poor generally rely more on housing benefit and council tax benefit than others, 85 per cent of the gain they receive from the raising of the tax allowance is swiftly taken away again because some of their benefit is withdrawn as their income increases.

Chief executive of CPAG Alison Garnham said: "Families already struggling with rising living costs face another body blow as a potentially devastating package of benefit cuts is introduced this month which will grab desperately needed financial help away from families and suck billions of pounds of spending power out of local businesses and communities."

Low income families with debt will likely struggle even more to make payments as a result of the changes. Many are now looking into taking up debt consolidation loans in order to restructure their finances, potentially allowing them to free up money.

By Amy White

Find out more about money management on the ClearDebt blog.

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