Personal allowances and tax rate bands were increased in line with inflation. The rates of tax for individuals are unchanged. The benefit is in the region of £225 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, the separate charge to National Insurance, and the possibility that a separate claim may be made for child and working tax credits to be repaid by the Revenue. The calculation of the tax position remains as complex as ever.
Income split between husband and wife
In December 2005, the Court of Appeal decided an important case about husbands and wives owning a company (Arctic Systems Ltd) between them in favour of the taxpayer. The Revenue are appealing the case to the House of Lords, but there was some speculation that Gordon Brown would change the rules for the future in case the Lords dismiss the appeal. However, no announcement was made, so it appears that the rules remain the same for the next year at least - whatever the judges decide the rules currently are!