Tories say the small print means higher taxes for families

Millions of hard-working families will suffer a tax hike under measures in the small print of this week's Budget, the Tories said last night, and families earning more than £39,500 a year will not qualify for the new children's tax credit to be introduced in April 2001.

The disclosure fuelled Tory claims that the Government was penalising middle-class voters to channel resources into Labour's traditional heartlands ahead of the general election expected next year.

The new credit, which will replace the married couple's allowance, will not be paid in full to families paying the 40p top rate of income tax because Gordon Brown, the Chancellor, has decided to means-test it.

For every £15 of earnings above the threshold for the 40p tax band - on taxable income of more than £28,000 - £1 of the new credit will be withdrawn.

An analysis by the Conservative Research Department claimed many more people would be drawn into the top rate when the married couple's allowance is abolished next month. The Tory report said a one-earner couple earning £34,000 a year would suffer a "penal" rate of tax when the new credit starts, losing 47p of any extra £1 they earned.

"More than one million families with children are paying higher rate tax," said the report. "These families will either get less than the full children's tax allowance or lose entitlement to it altogether. Gordon Brown's changes in family taxation will leave them worse off."

A Labour spokesman called the Tory report "complete nonsense" and said the Opposition had got its sums "completely wrong".

He said the family earning £34,000 a year would be eligible for £6.70 a week of child tax credit, making it £4.97 a week better off than under the married couple's allowance.