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Last Updated: Wednesday, 16 March, 2005, 18:16 GMT
Budget 2005: Tax and benefits guide
A calculator
Chancellor Gordon Brown has announced tax breaks for first-time homebuyers and pensioners as well as enhanced tax credits for low-income and lone parent families struggling with childcare costs.

Here is a guide to the main benefit and tax changes that come into force on 6 April.

Income Tax

Many of the tax and benefit changes which will come into force next month were announced in December's pre-Budget report.

These include the thresholds on employees' National Insurance - now 11% of earnings above 94 a week and 1% of earnings above 630 a week.

The chancellor has increased the thresholds at which taxpayers incur income tax at rates of 10%, 22% and 40% in line with inflation. This will come as a relief to those who feared he would freeze the thresholds and so drag more people into higher-rate tax bands.

Income tax and national insurance
Personal allowance 2004-5 2005-6
4,745 4,895
Tax bands
10% on earnings 4,746-6,765 4,896-6,985
22% on earnings 6,766-36,145 6,986-37,295
40% on earnings 36,146 + 37,296+
Source: HM Treasury

Savings and property

The chancellor has confirmed that the current 7,000 tax-free savings limit for Individual Savings Accounts (Isas) will be kept until 2010.

The Budget also offered first-time buyers in many parts of the UK a reprieve from stamp duty.

The chancellor increased the starting threshold for stamp duty from 60,000 to 120,000.

Families, who fear that rising property values could boost their inheritance tax (IHT) bill, may benefit from a rise in the inheritance tax threshold.

From 6 April, the first 275,000 of an estate will be exempt from inheritance tax, levied at 40%.

Pensions, savings and property
Inheritance tax threshold 2004-5 2005-6
263,000 275,000
Stamp duty 2004-5 2005-6
Up to 60,000 0% 0%
60,001 to 120,000 1% 0%
120,001 to 250,000 1% 1%
250,001 to 500,000 3% 3%
Over 500,000 4% 4%
Source: HM Treasury

'Sin' taxes

Car drivers were given a pre-election sweetener with another freeze in petrol duty. Vehicle Excise Duty on small and medium-sized cars will also remain the same.

Tax increases on booze and fags were broadly in line with the increases seen in the last Budget.

'Sin' taxes and transport
* Took effect on 1 September 2004
2004-5 2005-6
Spirits Frozen Frozen
Cigarettes +8p a packet +7p a packet
Beer +1p a pint +1p a pint
Wine +4p a bottle +4p a bottle
Petrol +1.9p a litre* +1.22p a litre
Diesel +1.9p a litre* +1.22p a litre
Source: HM Treasury


Pensioners are being offered a 200 council tax rebate, which will be paid in the autumn - but may be a one-off payment.

Pensioners will also receive a 200 winter fuel payment while the over-80s will get 300 - the same as this winter.

Low-income families with childcare needs will receive a significant boost, as an extra 1bn is being given to these families.

Payments for children, under the Child Tax Credit scheme, will rise in line with earnings and over the coming three years by a total of 13%, he said.

Benefits and tax credits
State pension 2004-5 2005-6
Single 79.60 82.05
Couple 127.25 131.20
Pension credit (guarantee) 105.45 109.45
Child benefit (first) 16.50 17
Child benefit (other) 11.05 11.40
Child tax credit (family element) 545 a year 545 a year
Child tax credit (child element) 1,625 a year 1,690 a year
Source: HM Treasury

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