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Last Updated: Sunday, 18 March 2007, 16:52 GMT
The Budget: What we already know
Analysis
By Julian Knight
Personal finance reporter, BBC News

Gordon Brown
We already know a lot about future tax changes

Chancellor Gordon Brown will deliver the Budget on Wednesday. The changes outlined in the report could have an impact on the personal finances of millions of Britons.

This is what we already know will be in the Budget.

In addition, we examine some possible areas of tax change.


SAVINGS AND INVESTMENT

In his pre-Budget report, the chancellor confirmed that Individual Savings Accounts (ISAs) will continue beyond 2010.

The popular savings vehicle - some 16 million Britons have an ISA - allow people to save or invest up to 7,000 tax free each year.

But the 7,000 investment limit, first set in 1999, is not set to increase.

As a result, in real terms, the value of money savers can put away each year tax-free is falling.

The tax break on Venture Capital Trusts (VCT) has now been reduced from 40% to 30%.

Some VCT providers have predicted that investment will fall as a consequence.

INCOME AND INHERITANCE TAX

There has been a high-profile campaign in some parts of the media for reform of inheritance tax (IHT).

The number of estates subject to IHT has been growing apace in recent years.

The main reason for this has been phenomenal growth in house prices, pushing the value of more people's estates above the IHT threshold.

INCOME TAX ALLOWANCES 2007/08
Personal allowance for under 65s rises from 5,035 to 5,225
Personal allowance for age 65-74 rises from 7,280 to 7,550
Personal allowance for age 75 and over rises from 7,420 to 7,690
Married couple's allowance born before 6 April 1935 rises from 6,065 to 6,285
Married couple's allowance age 75 and over rises from 6,135 and 6,365

However, in the 2005 Budget, the chancellor announced that the IHT threshold would rise above inflation for the next few years.

In fact, the IHT threshold is set to increase to 300,000 in April.

Therefore, some experts suggest that the chancellor considers IHT to have already been "done" and as a result, there will not be any significant moves in the Budget.

The thresholds for income tax and national insurance for the 2007-2008 tax year were set in the pre-Budget report.

Thresholds are rising roughly in line with inflation.

GREEN TAXES

Owners of heavily-polluting vehicles have already seen their Vehicle Excise Duty (VED) increase.

In the last budget, a new higher rate of VED was introduced

VEHICLE EXCISE DUTY
Find out which band your car is in

Heavily-polluting cars, such as some 4x4 vehicles, are now taxed at a new higher rate of road tax, at 210 a year.

At the same time, some less polluting vehicles were exempted from the tax.

Owners of heavily-polluting vehicles may be in line for more pain in this year's Budget.

The top bands of VED may increase - with some think-tanks calling for a substantial rise to discourage people from buying heavily-polluting vehicles.

A 4x4
Drivers of 4x4s may pay higher road tax

Fuel duty was already increased by 1.25p in the pre-Budget report.

Further rises in petrol duty can not be ruled out.

The controversial move to raise Air Passenger Duty, announced in the pre-Budget report, went ahead in February.

As part of a carrot-and-stick approach, the chancellor has already announced that so-called zero-carbon homes will not be subject to stamp duty land tax.

There are only a handful of zero-carbon homes at present, but the chancellor has said that all new builds should be zero-rated in 10 years time.

With the environment hitting the headlines, there has been speculation that the chancellor may introduce further incentives for households wishing to insulate or take other energy-saving measures.

PROPERTY

The difficulty that many people are having in getting on to the property ladder is a hot topic.

The government has committed itself to improving the supply of new housing, primarily through speeding up the planning process.

STAMP DUTY RATES
Below 125,000: zero rate
Above 125,000: 1%
Above 250,000: 3%
Above 500,000: 4%

However, these measures will take time to come to fruition. In the meantime, there have been calls for the threshold at which Stamp Duty Land Tax is paid to be raised.

At present, most property sold over 125,000 is subject to the tax.

Higher tax charges apply for higher-value property.

Halifax bank, among others, has argued that in order to reflect the rise in house prices fully, the stamp duty threshold needs to rise considerably.

Last time around, the chancellor raised the threshold at which 1% tax is payable from 120,000 to 125,000, roughly in line with inflation.

PENSIONS

The increase in the state pension for next year has already been announced. At present, increases are linked to inflation.

In the pre-Budget report, the chancellor said that from April, the pension credit minimum guarantee would rise by 5 a week for single people over 60 and 7.65 a week for couples.

As for the winter fuel payment, this has been previously set at 200 and guaranteed for the duration of this parliament.

The over-80s will enjoy an additional 100 in winter fuel payments.

However, energy campaigners and consumer groups have called for the winter fuel allowance to rise substantially.

They say that gas and electricity bills have risen so rapidly in recent years that winter fuel allowance has little impact.

FAMILY

In April, benefit payments for the poorest children will rise to 64 a week.

In addition, child benefit is to be paid to expectant mums in the last few months of pregnancy, to help them cope with the financial costs of childbirth.

But experts have suggested that the government needs to do much more - or miss its target of lifting half of children out of poverty by 2010.

Analysis has suggested that an extra 4bn needs to be set aside in order for the government to get back on track in cutting poverty levels.

Such an extra financial commitment is unlikely, but an increase to the child tax credit could be on the cards.

The chancellor may outline extra money for education, but much will be left, no doubt, for the government's Comprehensive Spending Review, which is published later this year.




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