Tax rates and allowances (Table A)

As announced last year, the main personal allowance is frozen, instead of increasing in line with inflation as normal. This effectively leads to a tax increase for anyone whose income has risen over the last year. The 10% and 22% bands have been increased
by inflation.

The allowances for those aged 65 and above have been increased by more than the rate of inflation, representing a tax reduction.

Tax credits

The new system of Tax Credits became effective on 6 April 2003. Working Tax Credit (WTC) and Child Tax Credit (CTC) replace the previous systems of support for people on low incomes and people with children. The new credits are paid to claimants, rather than being an automatic adjustment to tax liabilities. Claims are made based on the joint income of a couple.

WTC will be given to employed and self-employed people. It includes an element for childcare costs (up to 70% of £200pw), and is tapered away as income increases.

CTC has elements for each child and for "the family". This basic credit (£545pa) will be paid to claimant couples with income of up to £50,000, and some entitlement will still be due on incomes up to £58,000 (£66,000 in the year a child is born).

For a family with substantial childcare costs, support of about £3,300 can be available even on an income of £35,000, significantly reducing the tax burden.

Charitable giving

As announced last year, a new simplified procedure is to be introduced for assigning tax refunds direct to a charity and claiming Gift Aid relief. However, this will only take effect for 2003/04 tax returns issued in April 2004.

Support for carers

From 6 April 2003, new rules will apply to financial support given to adopters and foster carers. Adoption allowances will be exempt from tax, and receipts from foster care will only be taxable if they exceed a limit which varies according to the number of children cared for.