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Summary of Main Personal Tax Changes 2005-06


Income Tax/National Insurance
Personal Allowance £5,035 up £140
Personal Allowance 65-74 £7,280 up £190
Personal Allowance 75+ £7,420 up £200
 
Income Limit for Age-related allowance £20,100 up £600
 
Married Couples Allowance for
People born before 6/4/35 £6,065 up £160
Married Couples Allowance 75+ £6,135 up £160
Minimum Married Couples Allowance £2,350 up £70
 
Blind Person's Allowance £1,660 up £50

 

Tax Bands
10% (Starting Rate) £0-2,150
22% (Basic Rate) £2,151-33,300
40% (Higher Rate) £33,300+

NOTES: Dividend income is "top-sliced", followed by interest income and then other income. Higher rate taxpayers pay tax on dividends at 32.5%. Interest income is taxed at 10%, 20% and 40% in the respective bands.

 

National Insurance (Class 1 Employed)
Threshold £97/week
Upper Earnings limit £645/week
Contracted in contributions rate (£97.01-£645/week) 11%
Contracted in contributions rate (above £645/week) 1%

NOTES: Rebates apply for contracted-out employees and employees in certain pension schemes and other rates apply to married women and the self-employed.

 

Tax Credits
Tax credits must be claimed promptly or lost. Unclaimed personal allowances may be retrieved from the Inland Revenue up to six years later BUT tax credits, like most state benefits, may only be backdated for up to three months. Request a claim form or check your eligibility by calling the Inland Revenue on 0800 500 022.

Child Tax Credit
Parents, married or unmarried, earning up to £50,000 a year may claim CTC of £545/year for a child aged up to 16 (18 if in full-time education), doubled to £1,090/year for families with a child under one. Families with income below £14,155 (up £245) may claim CTC of £1,765/year (up £75) for each child. Above these thresholds, the credit is gradually withdrawn.

Child tax credit is paid based on previous year income. Provided that any increase in your current year income does not breach the 'income disregard' threshold the taxman will not want any tax credits back. The income disregard threshold jumps from £2,500 to £25,000.

Child Benefit rises by 45p to £17.45/week for the first or eldest child.

Working Tax Credit
The Working Tax Credit is paid via employers. The basic element rises by £45 to £1,665.

 

Capital Gains Tax Threshold
Individuals £8,800 up £300
Inheritance Tax Threshold £285,000 up £10,000

 

Pension Schemes Allowances
Annual Allowance £215,00  
Lifetime Allowance £1.5m  

 

Stamp Duty
  Residential Non-Residential
Nil <£125,000 <£150,000
1% >£125,000 >£150,000

 

Excise Duties
Vehicle Excise Duty for cars registered before March 2001 is frozen at £110 for those with engine capacity below 1549cc. For cars with larger engines the rate rises by £5 to £175.

The graduated VED for vehicles registered after March 2001 is held unchanged for vehicles in bands D and E at £125 and £150 respectively. Vehicles with low emissions in band A will pay no VED (a cut of £65) while vehicles in band B and band C also benefit from cuts in VED of £35 and £5 respectively. The vehicles with high emissions in band F will pay £25 a year more and a new higher emission band G (for vehicles registered after 23 March 2006) has VED set at £210 a year for petrol driven motors and £215 a year for diesel cars.

Fuel duties will increase but the rise has been deferred until September 1 because of continued volatility in world oil markets.

Beer rises by a penny a pint, wine by 4p a bottle. Duty on sparkling wines and spirits is unchanged.

Cigarettes up 9p/pack; cigars 3p/pack of five; rolling tobacco up 5p/25g and pipe tobacco up 5p/25g.

Child Trust Funds

Payments into Child Trust Fund accounts at age seven will be £250 for all children, with children from lower-income families receiving £500. The payments will be made on a similar basis to the initial endowments. The Government continues to consult on whether further payments should be made into Child Trust Fund accounts at secondary school age.

Venture Capital Trusts

The rate of income tax relief on investments in Venture Capital Trusts is cut back to 30% after two years at 40%. This is still above the original 20% rate. The new rate of income tax relief is introduced as part of a package of changes toVCTs, the Enterprise Investment Scheme (EIS) and the Corporate Venturing Scheme. These changes will, so the Treasury claims, renew the schemes' focus on providing incentives for long-term investments in small companies facing the most severe barriers to accessing equity finance.

Further changes include a refocusing of the 'gross assets test' to £7 million immediately before investment and £8 million afterwards, to focus on the companies most in need of improved access to finance. This effectively cuts the size of companies that VCTs may invest in by half. The existing rule is that VCTs can only invest in companies with gross assets of no more than £15 million at the point of investment. The change will push investment to the smaller end of the scale.

The minimum holding period for new shares in VCTs is extended from three to five years to incentivise more stable, longer term investments.

The annual Enterprise Investment Scheme investment limit eligible for income tax relief is doubled to £400,000.

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