Budget 2005


Personal Income Tax

Tax Credits

National Insurance Contributions





Capital Gains Tax

Stamp Duty Land Tax

Inheritance Tax

Corporation Tax

Business Tax

Value Added Tax

Other Measures

Tax Tables

National Insurance


Other Measures


Tax avoidance

As usual, the Chancellor introduced a number of measures to try to close down loopholes. Some of these were announced at the time of the Pre-Budget Report in December, including a sweeping attack on the variety of schemes used by employers to pay big bonuses in a tax-efficient way. Artificial attempts to defeat the spirit of the law - that employee rewards should be charged to income tax and NIC - are supposed to be rendered ineffective with effect from 2 December 2004. Time will tell whether these measures succeed, or whether they are too vague to be legally effective.

A number of measures announced are much more specific. Those who market tax avoidance schemes now have to tell the Revenue what they are doing and how it is supposed to work; not surprisingly, the Revenue are then changing the rules at the earliest opportunity so that it will not work any more.

These disclosure rules will be extended from 1 July 2005 to cover SDLT schemes relating to commercial property worth over £5m. Up to now, only income tax, corporation tax and CGT schemes have been discloseable.

Gift aid and museums

Museums and zoos have been able to claim 'Gift Aid' relief on entry charges. This means that the Inland Revenue contribute a further 28% of the entry fee, where the customer makes a declaration to the organisation. In 2004, the government suggested that this was a loophole and it would be closed down; but it has now decided to keep the relief in a modified form. For the next year, the relief appears to operate as before. For admissions from 6 April 2006, there will be a restriction to one or other of the following situations:

  • where the entry fee permits unlimited access to the site for a 12-month period;

  • where a donation is made which exceeds the normal entry fee by at least 10%.

Civil partnerships

The Civil Partnership Act 2004 recognises a new formal relationship, equivalent to a marriage between same-sex partners, from 5 December 2005. The Budget confirms that the tax rules will be changed to recognise this relationship in the same way as a traditional marriage for tax purposes. This will be very significant for inheritance tax and CGT, where married couples can in most cases transfer assets from one to the other without any charge to tax. There will be a number of other tax consequences, and those considering a civil partnership should take advice about the effect on their finances.


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