The government has cut the amount of benefits universal credit claimants lose if they earn money. About 40% of claimants are working. And, as it is known, has been cut from 63p to 55p - for each £1 earned. But this can still leave claimants effectively paying very high Rates of Tax . In fact, they can end up taking home a smaller proportion of an extra £1 earned than someone earning £150,000 a Year . Here, are five examples of workers paying very high effective Tax Rates . Before the chancellor cut the taper rate, a universal credit claimant earning £9,000 a Year from a part-time job would be taking home 37p of an extra £1 earned. Now, that rises to 45p - But that is still the equivalent of a pretty high Tax rate. Now consider an employee, for example a parent, earning enough to pay Income Tax - so at least £12,570 a Year - But still entitled to universal credit. Even with the lower taper rate, they are still taking home only 31p of an extra £1 earned. The taper rate is applied after Income Tax and National Insurance have been paid, which is why, in this example, it is taking 37p of an extra £1 earned and not 55p. Income Tax Rates and bands are slightly different. There is a 19% starter rate for Income Tax between earnings of £12,570 and £14,667. But in this case, that would still leave our worker taking home 31p of an extra £1 earned. Child benefit is paid to families to help with the costs of raising children. It is £21. 15 a week for The First child and £14 a week for each additional child. But the benefit is withdrawn gradually for those earning between £50,000 and £60,000. Consider someone with three children, earning £50,500 a Year . The Loss of child benefit means for an extra £1 earned, they take home 32p. The higher rate of Income Tax in Scotland is 41%, so our worker with three children, earning £50,500, would keep 31p of an extra £1 earned. In Scotland, people start paying the 41% higher rate of Income Tax when they are earning £43,663 a Year . In the rest of the UK, they start paying a 40% higher rate at £50,271 a Year . But National Insurance Rates are the same throughout the UK, which means a worker in Scotland earning between £43,663 and £50,271 would be paying both the higher rate of Income Tax and the 12% higher rate of National Insurance at the same time, meaning they take home only 47p of an extra £1 earned. In the rest of the UK, employees earning that much would be paying only 2% National Insurance, so would take home 57p of an extra £1 earned - 10p More Than their Scottish counterparts. People do not have to start paying Income Tax until they are earning More Than £12,570 a Year . This is called The Personal allowance. But The Personal allowance is withdrawn at a rate of £1 of allowance for every extra £2 earned above £100,000. So those earning More Than £100,000 a Year start paying Tax on part of their earnings they did not previously have to pay Tax on. And this means someone earning between £100,000 and £125,140 a Year would take home 38p of an extra £1 earned. In Scotland, it would be 37p. All of these people are taking home less of an extra £1 earned than somebody earning More Than £150,000 and paying what is supposedly The Top rate of Tax . That person would take home 53p of an extra £1 earned. Bear in mind all of these figures are the current Rates - National Insurance Rates will be rising in April. We asked the Treasury why some workers pay much higher Rates of Tax than people earning considerably more But have not received a reply. In all the examples above, somebody earning an extra £1 still gets to keep some of this extra money - But there are situations in which earning an extra £1 could actually make someone worse off overall. These are known as cliff edges. For example, if you earn less than £50,270 and your husband, wife or civil partner earns less than £12,570, they can use to transfer £1,260 of their Income Tax personal allowance to you. That would mean you no longer needed to pay Income Tax on £1,260 of your earnings, saving you £252 a Year . But if you earned an extra £1, putting you on £50,271, you would no longer be eligible for marriage allowance, leaving you almost £252 a Year worse off. In Scotland, the Cliff Edge would be at £43,662 a Year . Cliff edges also occur with other schemes, including the and.
