Aside from Housing Technology’s continuing scepticism about the IT systems underpinning the ongoing implementation of universal credit, one of the little reported benefits of universal credit is how it will reduce the effective taxation on claimants’ earnings from almost 100 per cent to around 65 per cent. Or to put it another way, at present for every £1 earned, claimants lose the same amount of benefits whereas with universal credit, earned income will be subject to a withdrawal rate of ‘just’ 65p per pound earned.
While some people argue that an effective tax rate of 65 per cent is still much too high, especially when one considers that HMRC’s top tax band is 45 per cent for income over £150,000, it is certainly a step in the right direction.
