Pension contributions (Table B)

The "earnings cap" for personal pension contributions and occupational scheme benefits is set at £102,000 for 2004/05 (2003/04: £99,000). The maximum contributions for different ages are set out in the table.

It is confirmed that the rules for tax-approved pension schemes will change radically from 6 April 2006. The new limit will be based on the funds available to buy benefits at the date of retirement, rather than on contributions or on the benefits themselves. The cap is to be set at £1.5m to start with, with set increases up to £1.8m by 2010. Transitional rules will give some protection to those who are over the limit at the outset. Anyone else who cashes in a larger fund after that date will suffer a 55% clawback charge on the excess, which can be taken (after tax) as a lump sum.A smaller clawback applies if the excess is taken as a pension.

Individual Savings Accounts (ISAs)

The maximum amount which can be contributed to a tax-free ISA remains £7,000 for 2004/05. It has been announced that this will fall to £5,000 in 2006/07.

Venture Capital Trusts (VCTs)

From 6 April 2004, it will no longer be possible to defer the tax charge on a capital gain by investing in new VCT shares. There will still be income tax relief on up to £200,000 of new shares (increased from £100,000 before 6.4.04), and the rate is increased to 40% for the two years 2004/05 and 2005/06 to compensate for the loss of CGT deferral. VCT shares remain exempt from tax on gains or income.

Enterprise Investment Scheme (EIS)

CGT deferral remains available for investment in new EIS shares. The maximum limit for 20% income tax relief on investment is increased to £200,000 (from £150,000) from 6 April 2004.

Film schemes

For some years, the 100% tax relief for investment in "British films" has led not only to finance for the UK film business but also to a separate tax-avoidance industry. Steps were taken to close this down by restricting the tax relief available to "inactive business partners" from 10 February 2004, and by introducing "exit charges" on those whose tax schemes allowed them to enjoy the 100% relief on costs, but walk away from any later tax on income. This has led to a crisis among those who are actually making British films, but the Government is determined to close down the avoidance schemes. A new credit will instead be given directly to producers of films costing up to £15m.