Budget 2005: Tax and benefits guide

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

Benefits

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