Will you really be better off in 2015?

With a general election next May, politicians are keen to give working families more money in their pockets in order to secure votes, or at least give the illusion of being better off. But will you keep more of your cash in 2015?

The good news from the Autumn Statement at the beginning of December was that the personal allowance – the bit of your wages you don't have to pay tax on – is increasing to £10,600 instead of £10,500 in April.

The idea behind it was to give more low families more of their cash to spend, placating the 'squeezed middle' who have been hit by increased costs of living and stagnant wages over the past five years.

And the squeezed middle may start to feel a bit better off next year not just thanks to the change in the personal allowance and a tweaking of the higher-rate income tax threshold that means fewer will pay 40% income tax, but a sharp fall in food and fuel bills that has seen inflation pushed to a 12-year low of 1%.

Really squeezed?

However, spare a thought for those who can't class themselves as the 'squeezed middle' but just 'squeezed'; they are the low income households who rely on benefits and tax credits to top up their meagre wages to a level on which they can just about live.

These people, and the numbers run into the millions, won't see any benefit from the personal allowance changes because it will be wiped out by a freeze in their work allowance – the amount individuals can earn before their benefits are cut -until 2018.

Research by think-tank Resolution found that a couple with children would need their combined earnings to increase more than £1,300 to compensate for the allowance freeze – 10% higher than the rate of wage increases forecast by the Office of Budget Responsibility.

Basically, it means that if you are in work and receiving top up benefits, you can't work more to support your family because you'll lose the tax credits you do get but the amount you do get from the government will be frozen. It's a catch 22 for working families and surely not the best way to help people to help themselves.

For every £1 earned over the threshold, the lowest income individuals will lose 65p in benefit – an effective tax rate of 65% which even the richest in our society don't pay.

The government wants us to believe we'll all be better off in 2015, but spare a thought for the poorest in our society who will become the 'squeezed poorest'.

Read more:

Squeezed middle, what squeezed middle?

Squeezed middle; the 1%, who are they?

The UK really does have the most squeezed middle