Fifty-Seven Tax And Spending Changes Will Deal A Blow To Those In Debt, warns Scottish Bankruptcy Advice Company,

The first budget by new Chancellor George Osborne is set to heap more misery on the UK’s beleaguered debtors as their incomes go down and household bills rise, says Scottish Bankruptcy Advice Company,

The new Chancellor added 57 new tax and spending changes on top of an existing 81 that have yet to take effect. All families are set to be squeezed for an additional £400 by 2012-13 as National Insurance rises, tax credits are cut, pay is frozen, prices for goods and services rise, and 20% VAT bites.

A spokesperson for Scottish Bankruptcy Advice Company, said: “Normally a budget makes a few cuts here and there, but never so many by so much that the financial wellbeing of most families is seriously threatened. This budget however is loaded with cuts that will really hurt the average family, especially ones with two working parents. Add to that the fact that the average Britain now owes just under £10,000 in non-mortgage debt and there are a lot of people going to be struggling soon. It’s highly likely that debt management solutions like IVAs, Trust Deeds, DMPs and DAS will start to rise rapidly once these changes start to squeeze.”

Of all the changes, the ones most likely to hurt the average family include:

Tax Credits

Households with an income of £40,000 can no longer claim tax credits while those with an income between £21,000 and £40,000 will be reduced. A couple with two children and a joint income of £45,000 will lose their tax credits totaling £333. However families on the lowest incomes will get a rise of up to £150 a year.  In addition, tax credit claims can only be backdated by one month rather than the current three, meaning a family would have to see a £2,500 income fall to have their benefits recalculated.
Finally, the annual income increase for tax credits before triggering a payment adjustment will be decreased from £20,000 to just £5,000, but thankfully this will kick in sometime in 2013.

Child Benefit And Childcare Vouchers

Child benefit will be frozen for three years amid rumours it will one day be scrapped, while childcare vouchers will be capped for those in the 40% or higher income tax bracket.

National Insurance

National Insurance (NI) is set to increase 1% across the board, although for the lowest earners this will not take effect until their income hits £139. Also, staff who save NI by reducing their salary in return for subsidized canteen meals will see this perk cut.


The government has changed its measure of inflation from the Retail Price Index to the Consumer Price Index, which will ensure allowances and benefits rise much slower than before. This means a larger number of households will be dragged into the higher tax brackets and a higher proportion of income is taxed.


Public sector workers earning over £21,000 will see a pay freeze. Their pensions contributions will also increase by 3% over the next three years, effectively reducing their take home pay.


The maximum rent that can be paid out as housing benefits will be capped for new claimants. Previously rents were based on average market rents – now that will drop to just 30% of average rents in the area. A one bedroom property will be capped at £250 a week and £400 for a four-bedroom property. Anyone already claiming will have their benefit slashed from January 2012.


Tax will increase on anyone with a company car while the emissions bands will decrease by 5g/km, effectively catching thousands of previously exempt company car users

Winter Fuel Payments

Perhaps most hard to stomach of all is the reduction in winter fuel payments to the elderly, which decreases from £250 to £200 for the over 60s and from £400 to £300 for the over 80s.

But if you thought about commiserating with friends about the money you were going to lose over a evening at your local, think again. Even alcohol hasn’t escaped the chancellor’s scrutiny: a pint of beer will cost 4p more while a bottle of wine will rise by 15p and a bottle of spirits by 54p.



Write Off Unaffordable Debts

In most circumstances an award of Bankruptcy will allow you to write off most of what you cannot afford to repay, i.e. liabilties such as unsecured loans and credit card debts will be dealt with by your Trustee. Note: There are some debts that cannot be written off. Click here* for more information on the limitations.

Free From Debt Pressures

Unlike a Trust Deed Scotland, Sequestration can make you totally free from provable debts, although you will have to make a contribution from your income for 3 years if you can afford to. Your Trustee takes over dealing with your creditors and you will be totally debt free subject to some limitations depending on your circumstances.

Government Legislation

A Sequestration is under the control of the Scottish Government and is intended to help people who are struggling wither finances. An award of Bankruptcy is not a debt management plan or IVA, meaning there are no regular monthly repayments to make, if you have no surplus income after meeting your normal monthly outgoings.