Gordon Brown’s extension of the 10% income tax band and his increase of the Children’s Tax Credit will be seen as the two main Budget measures for individuals. With additions to his flagship Working Families Tax Credit system (particularly for childcare) and promises of better maternity (and paternity!) benefits, this could well be seen as a Budget for families.
The 10% tax band increase adds some £3.60 a month to most taxpayers’ take home pay. But there was disappointment for those hoping for a significant rise in the 40% tax band starting point. It currently comes in at £28,400 of taxable income - it rises by 3½% to £29,400. As many salaries are rising faster than this, more people will enter the top tax bracket – fiscal drag in operation and a classic stealth tax.
Those with younger children do well - the Children’s Tax Credit comes in at £10 a week this April. And would-be parents have plenty of time to plan ahead -- from April 2002 the £520 benefit will be doubled for the first year of a child’s life. Increasing maternity pay to £100 for 16 weeks and introducing paid paternity leave from 2003 are good news for parents but not necessarily for employers.
For savers, increases in ISA limits were confirmed and the rules on Venture Capital Trusts and Enterprise Investment Schemes were relaxed to make them more flexible. Those interested in the buy to let market may find capital allowances for renovated flats over shops create additional investment routes. Meanwhile pension funds will widen their investment range with the acceptance of the Myners Report recommendation that the Minimum Funding Requirement be abolished – potentially one of the more far-reaching Budget measures.
Capital Gains Tax and Inheritance Tax were largely unaffected. The CGT annual exempt amount rises by £300 to £7,500 and the IHT nil rate band by £8,000 to £242,000 - both useful increases. There is still no sign of a restructuring of IHT – one has to wonder if this is marked down for Labour’s second term?
The traditional sin taxes got off lightly. Drivers really do quite well, although anyone who gets free fuel from their employer face a new mileage rate in 2002.
And it seems we are even being encouraged to bet with the dropping of betting duty. Those who plan to celebrate by having a flutter on the date of the next election should bear in mind that the bookies may have to pass on their additional profits tax somehow – and that the new tax regime probably won’t arrive until January 2002!
