Personal allowances and higher rate thresholds were increased in
line with inflation. The rates of tax for individuals are unchanged.
The benefit is in the region of £250 for a higher-rate taxpayer.
This benefit is much smaller for a person on a low income, but is
likely to represent a larger share of that person's tax bill.
The overall effect is complicated by the different rates which continue
to apply for general income, interest and dividends, and the possibility
that a separate claim may be made for tax credits to be paid by
the Revenue to individuals. The calculation of the tax position
remains as complex as ever.
Income split between husband and wife
The last year has seen the Inland Revenue arguing that many businesses
which are jointly owned between husband and wife are in fact tax
avoidance devices, and the income of a non-working owner should
be taxed on the working spouse. A court case was under appeal as
the Budget speech was being delivered. The Chancellor might have
changed the rules to put the matter beyond doubt, but there were
no announcements at this point. If the appeal goes against the Revenue,
there could be late amendments to the Finance Bill to reverse the
effect of the decision.