Universal Credit '80% tax' trap to ensnare tens of thousands of Britons - see if this strikes you

Under a 'messy' double whammy around 50,000 families face an effective tax rate of between 80p and 96p on every pound they earn - and 90,000 are set to be trapped by 2030

There is a 'messy' situation where some people's UC and Child Benefit are both withdrawn at the same time (stock photo) (

Image: Getty Images/iStockphoto

Tens of thousands of families face effective tax rates of at least 80% in a double whammy, experts warn today.

As the cost of living rises, around 50,000 families will be eligible for Universal Credit (UC), even if a member earns more than £50,000.

This will lead to a "messy" situation where both their UC and Child Benefit will be taken away at the same time they earn more money.

In addition to this there are the usual deductions for income tax, national insurance, student loan repayments and pension.

Combined, that means between 80 and 96 pence of every extra pound these people earn will never reach their bank account, according to the Resolution Foundation.

The think tank says 50,000 families are currently in this trap, and around 90,000 could be caught in it by 2030, as income tax thresholds are frozen.

Many families will be eligible for Universal Credit (UC) - even if a member earns over £50,000 (stock photo) (

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ecu)

The Resolution Foundation admits that "some might be surprised" that a family with an income of £50,000 can still qualify for UC, and "that is of course not the usual position".

But he adds, "For those with high rents or high childcare costs, it's perfectly possible."

Under Universal Credit, claimants lose 55p in benefits for every pound they earn above a certain threshold.

As part of child benefit, parents must repay 1% of the...