Best of the Week
Most Popular
1. Gold vs Cash in a Financial Crisis - Richard_Mills
2.Current Stock Market Rally Similarities To 1999 - Chris_Vermeulen
3.America See You On The Dark Side Of The Moon - Part2 - James_Quinn
4.Stock Market Trend Forecast Outlook for 2020 - Nadeem_Walayat
5.Who Said Stock Market Traders and Investor are Emotional Right Now? - Chris_Vermeulen
6.Gold Upswing and Lessons from Gold Tops - P_Radomski_CFA
7.Economic Tribulation is Coming, and Here is Why - Michael_Pento
8.What to Expect in Our Next Recession/Depression? - Raymond_Matison
9.The Fed Celebrates While Americans Drown in Financial Despair - John_Mauldin
10.Hi-yo Silver Away! - Richard_Mills
Last 7 days
INTEL (INTC) Stock Investing in AI Machine Intelligence Mega-trend 2020 and Beyond - 18th Jan 20
Gold Stocks Wavering - 18th Jan 20
Best Amazon iPhone Case Fits 6s, 7, 8 by Toovren Review - 18th Jan 20
1. GOOGLE (Alphabet) - Primary AI Tech Stock For Investing 2020 - 17th Jan 20
ERY Energy Bear Continues Basing Setup – Breakout Expected Near January 24th - 17th Jan 20
What Expiring Stock and Commodity Market Bubbles Look Like - 17th Jan 20
Platinum Breaks $1000 On Big Rally - What's Next Forecast - 17th Jan 20
Precious Metals Set to Keep Powering Ahead - 17th Jan 20
Stock Market and the US Presidential Election Cycle  - 16th Jan 20
Shifting Undercurrents In The US Stock Market - 16th Jan 20
America 2020 – YEAR OF LIVING DANGEROUSLY (PART TWO) - 16th Jan 20
Yes, China Is a Currency Manipulator – And the U.S. Banking System Is a Metals Manipulator - 16th Jan 20
MICROSOFT Stock Investing in AI Machine Intelligence Mega-trend 2020 and Beyond - 15th Jan 20
Silver Traders Big Trend Analysis – Part II - 15th Jan 20
Silver Short-Term Pullback Before Acceleration Higher - 15th Jan 20
Gold Overall Outlook Is 'Strongly Bullish' - 15th Jan 20
AMD is Killing Intel - Best CPU's For 2020! Ryzen 3900x, 3950x, 3960x Budget, to High End Systems - 15th Jan 20
The Importance Of Keeping Invoices Up To Date - 15th Jan 20
Stock Market Elliott Wave Analysis 2020 - 14th Jan 20
Walmart Has Made a Genius Move to Beat Amazon - 14th Jan 20
Deep State 2020 – A Year Of Living Dangerously! - 14th Jan 20
The End of College Is Near - 14th Jan 20
AI Stocks Investing 2020 to Profit from the Machine Intelligence Mega-trend - Video - 14th Jan 20
Stock Market Final Thrust - 14th Jan 20
British Pound GBP Trend Forecast Review - 13th Jan 20
Trumpism Stock Market and the crisis in American social equality - 13th Jan 20
Silver Investors Big Trend Analysis for – Part I - 13th Jan 20
Craig Hemke Gold & Silver 2020 Prediction, Slams Biased Gold Naysayers - 13th Jan 20
AMAZON Stock Investing in AI Machine Intelligence Mega-trend 2020 and Beyond - 11th Jan 20
Gold Price Reacting to Global Flash Points - 11th Jan 20
Land Rover Discovery Sport 2020 - What You Need to Know Before Buying - 11th Jan 20
Gold Buying Precarious - 11th Jan 20
The Crazy Stock Market Train to Bull Eternity - 11th Jan 20
Gold Gann Angle Update - 10th Jan 20
Gold In Rally Mode Suggests Commitment of Traders (COT) Data - 10th Jan 20
Disney Could Mount Its Biggest Rally in 2020 - 10th Jan 20
How on Earth Can Gold Decline During the U.S. – Iran Crisis? - 10th Jan 20
Getting Your HR Budget in Line - 10th Jan 20
The Fed Protects Gamblers at the Expense of the Economy - 9th Jan 20
Last Chance to Get Microsoft Windows 10 for FREE! - 9th Jan 20
The Stock Market is the Opiate of the Masses - 9th Jan 20
Is The Energy Sector Setting Up Another Great Entry? - 9th Jan 20
The Fed Is Creating a Monster Bubble - 9th Jan 20
If History Repeats, Video Game Stocks Could Soar 600%+ - 9th Jan 20
What to Know Before Buying a Land Rover Discovery Sport in 2020 - 8th Jan 20
Stock Market Forecast 2020 Trend Analysis - 8th Jan 20
Gold Price at Resistance - 8th Jan 20
The Fed Has Quietly Started QE4 - 8th Jan 20
NASDAQ Set to Fall 1000pts Early 2020, and What it Means for Gold Price - 8th Jan 20
Gold 2020 - Financial Analysts and Major Financial Institutions Outlook - 8th Jan 20
Stock Market Trend Review - 8th Jan 20

Market Oracle FREE Newsletter

Nadeem Walayat Financial Markets Analysiis and Trend Forecasts

Universal Credit Doomsday for Tax Credits Cash ISA Savers, Here's What to Do

Personal_Finance / UK Benefits Nov 18, 2017 - 04:04 AM GMT

By: Nadeem_Walayat

Personal_Finance

Britain's hard working low paid tax credits benefit recipients are sleep walking towards their Universal Credits doomsday. Where typically a family of 4 jointly earning £16k per annum will currently be in receipt of £6,700 per annum of TC & WTC, whilst a family of 6 would typically receive £12,400, boosting their annual NET earnings to £28,400 that will have allowed many families to SAVE, without impacting on their tax credit benefit payments as long as the taxable interest earned is under £300. The key here being TAXABLE INCOME, which means interest earned on savings in tax free accounts such as Cash ISA's does not not impact on tax credit awards.


This taxable savings interest rule has allowed many if not most of Britain's 3 million tax credit recipient families to build up sizable Cash ISA holdings to well beyond the limit at which out of work benefits such as Income Support are subject to income withdrawal of £1 per week for every £250 of capital above £6000, with zero entitlement to benefits if capital exceeds £16,000.

So the tax credit system has been a significant encouragement for families to save in Cash ISA's as capital holdings for example of £50,000 currently have zero impact on tax credit awards.

However, all of that is about to change as Tax credit recipient families with ISA's and other tax free savings are facing their Universal Credits Doomsday! Leaving aside the fact that under Universal Credit the same family would typically be in receipt of 20% to 30% LESS in benefits due to the nature of Universal Credit which contrary to Ian Duncan Smiths mantra of 'making work pay' actually does the opposite by penalising work. The more one works the LESS well off they will be under Universal Credit. However that is not the doomsday that tax credits families being switched to Universal Credits will be facing over the next 2 years as instead of a 20% to 30% cut in benefits, many families will lose ALL entitlement to benefits. So a family of 6 will go from currently receiving £12,400 in tax credits per year to receiving ZERO under Universal Credits!

The reason being that Universal Credits in line with out of work benefits such as Income support takes into account CAPITAL rather than TAXABLE EARNINGS, i.e. savings interest. Which means instead of ignoring tax free cash ISA interest, Universal Credit will take into account the capital value of Cash and Shares ISA's. Those £40k to £50k nest eggs built up under tax credits translate into ZERO entitlement to Universal Credit, for which the maximum limit is £16k and £6k being the optimum maximum.

So hard working families who have built up sizeable ISA holdings need to start considering their options right now else they face their Universal Credits Doomsday of ZERO entitlement.

Options such as paying off ones mortgage, to going on a spending spree, buy a new car ? 2 new cars? family holiday of a lifetime? Though I would not advocate buying a bigger mattress to stuff ones cash under!

Perhaps its time to start planning to upgrading the greatest tax free vehicle of all, ones home, either by extending or moving and thus utilising ones Cash ISA holdings before the UC doomsday hits!

The bottom line is that Universal Credits does not work for working more just does not pay, and saving for ones future definitely does not pay! Furthermore, UC is designed to penalise families that rent over those who own their homes who have the get out of jail card of dumping their £40-£50k cash ISA holdings into their mortgages and thus increasing the equity in their homes, whilst those who rent are stuck and either have to spend most of their savings or lose all of their benefits even if their savings are only a fraction of the equity that home owners enjoy.

So no, Universal Credits just does not work!

By Nadeem Walayat

http://www.marketoracle.co.uk

Copyright © 2005-2017 Marketoracle.co.uk (Market Oracle Ltd). All rights reserved.

Nadeem Walayat has over 30 years experience of trading derivatives, portfolio management and analysing the financial markets, including one of few who both anticipated and Beat the 1987 Crash. Nadeem's forward looking analysis focuses on UK inflation, economy, interest rates and housing market. He is the author of five ebook's in the The Inflation Mega-Trend and Stocks Stealth Bull Market series that can be downloaded for Free.

Housing Markets Forecast 2014-2018The Stocks Stealth Bull Market 2013 and Beyond EbookThe Stocks Stealth Bull Market Update 2011 EbookThe Interest Rate Mega-Trend EbookThe Inflation Mega-trend Ebook

Nadeem is the Editor of The Market Oracle, a FREE Daily Financial Markets Analysis & Forecasting online publication that presents in-depth analysis from over 1000 experienced analysts on a range of views of the probable direction of the financial markets, thus enabling our readers to arrive at an informed opinion on future market direction. http://www.marketoracle.co.uk

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any trading losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors before engaging in any trading activities.

Nadeem Walayat Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Comments

JustAnotherExBanker
18 Nov 17, 20:49
No wonder the country's broke!

£12,400 per annum for a family of six?!

This means a large family is being subsidised by other tax payers!

What a crazy socialist system.


Nadeem_Walayat
19 Nov 17, 22:40
The System

The system is such designed so as to turn everyone (99%) into a benefit recipient so that they continue to vote for the status quo, those who offer the most election bribes paid for by printed money (government debt).

Just as it is designed to turn most into a debt wage slave.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules