Personal Income Tax
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
The allowances for those aged 65 and above have been increased
by more than the rate of inflation, representing a tax reduction.
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.
Tax Credits depend on making a claim,
which can only be backdated by 3 months. To establish entitlement
from the start of the new system, a form has to be submitted
by 5 July 2003.
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