Stay-at-home mothers are biggest losers in tax shake-up

Families where both adults work have been the main winners of the coalition’s tax reforms, official figures reveal today.

Some 8.3million households are winning twice from increases to the personal allowance for tax-free earnings because both adults have an income.

But the figures are likely to reopen a bitter row over the Government’s lack of support for stay-at-home mothers.

The amount of earnings on which no tax is paid will rise to £10,600 in april – the latest in a series of increases brought in by the coalition.

The Treasury analysis – the most detailed study to date on the impact of the reforms – shows that nurses, care workers, sales assistants and teachers are among the occupations to have benefited most from the increases.

people living in the South east have done best, followed by those in the north West. and some 2.7million workers will be taken out of tax altogether.

The study also shows that of the 5.6million families with children that have benefited from the allowance rises, half of those enjoyed the double advantage as both parents work.

and dual income families would be better off by an average of £2,100 if the allowance rises to £12,500, which is the target amount for both the conservatives and the Lib Dems.

Some will hail the figures as a sign that the Government’s most radical tax policy is a success. Lib Dem Mp Danny alexander, chief secretary to the Treasury, said they show the policy people is and ‘benefitingfamilies the workinglength and breadth of Britain’. But Tory Mps have complained of a discrepancy in the tax system between increasingly generous support for working couples with children and that for families where one parent stays at home. on top of income tax breaks, the coalition has promised ‘tax free childcare’ for dual earner couples worth up to £2,000 a year per child. Meanwhile the marriage tax allowance, which is designed to help single income families by allowing one spouse to transfer some of their allowance to the other, will only be worth around £200 a year when it comes into play in april. it will also only apply to those paying the basic rate of tax.

David cameron has suggested a conservative government would go further in supporting stay-at-home mothers, calling the marriage tax break ‘very much a first step’, while the other parties would scrap it.

The Tories and the Lib Dems are engaged in a fierce battle to win credit from voters for the income tax breaks. Mr alexander said that the personal allowance rises were the ‘Liberal Democrat flagship policy’ that has brought about the ‘greatest revolution in the tax landscape for working people in living memory’.

he added that the conservatives had dismissed it as ‘unaffordable’ in the run-up to the 2010 election while the Lib Dems had fought ‘tooth and nail’ for the successive rises.

his remarks will infuriate the Tories – who will today seek to put tax cuts at the heart of their campaign to stay in power.