Personal tax changes at a glance
Here are some of today's changes at a glance...
- All personal tax allowances have risen, with the under 65s allowance rising by £210 a year from £5,225 to £5,435.
- The older age brackets will see the bigger rises; the allowance for the 65-74 age bracket has increased from £7,550 to £9,030, and from £7,690 to £9,180 for the 75 years plus category.
- Winter fuel allowance will go up from £200 to £250 for the over 60s and from £300 to £400 for the over-80s.
- Married Couple’s allowance has increased by between £250 and £260; from £6,285 to £6,535 for the under 75s (born before 6 April 1935) and from £6,365 to £6,625 for those over 75-years-old.
- As announced in the pre–budget report, capital gains tax will be set at 18%. From April this year the CGT annual exempt amount will be increased to £9,600 in line with statutory indexation.
- By 2010 those on incapacity benefit will be expected to attend work capacity programmes
- All elements of the Working Tax Credit, except for childcare, will rise in line with indexation.
- Child benefit will rise to £20 a week for the first child from April 2009, a year earlier than planned. From the same date the child element of the child tax credit for families on low and middle incomes will increase by £50 a year above inflation.
Inheritance tax thresholds remain the same as Darling’s pre–budget announcements. If an individual’s inheritance before tax (£300,000) is not fully used then the amount can be transferred to their spouse.
That's not all! For the rest of our Budget 2008 coverage, click here
The tax levied on the total value of your estate after you die. IHT has to be paid by the beneficiaries of your estate before they can receive any of the money from it. The money can’t be taken from the value of the estate _– it has to be paid before any money can be released. There is an IHT threshold – known as the “nil-rate band” – below which no tax is levied (£325,000 in 2011/12). Any amount above the nil-rate band is subject to tax at 40%. If your estate totals £600,000, there is no tax on the first £325,000; however your estate will pay 40% tax on the remaining £275,000, a total of £110,000. Prudent tax planning can reduce your IHT liability, so always consult a specialist solicitor.
An increase in the general level of prices that persists over a period of time. The inflation rate is a measure of the average change over a period, usually 12 months. If inflation is up 4%, this means the price of products and services is 4% higher than a year earlier, requiring we spend and extra 4% to buy the same things we bought 12 months ago and that any savings and investments must generate 4% (after any taxes) to keep pace with inflation. Since 2003, the Bank of England has used the consumer prices index (CPI) as its official measure of inflation (see also retail prices index).
Child tax credit
A scheme started in 2003 that sought to replace a raft of other tax credits and benefits, the payout depends on the number of dependant children in a family, and its level of income. The amount of credit is reduced as income increases. It is payable to the main carer of a child, usually the mother, and is available whether or not the recipient is working.
Capital gains tax
If you buy an asset – shares, a second home, arts and antiques – and then sell it at a later date and make a profit, that profit could be subject to CGT. You don’t pay CGT on selling your main home (which is why MPs “flipped” theirs so regularly) or any securities sheltered in an ISA. Individuals get an annual CGT allowance (£10,600 in 2010/2011) but if you have substantial assets it’s worth paying an accountant to sort it for you.