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EDITIONS
 Thursday, 18 April, 2002, 17:10 GMT 18:10 UK
After the Budget: Ask the experts

  Click here to watch the forum.  


Chancellor Gordon Brown has raised taxes, with the stated aim of paying for better public services.

National Insurance payments will rise by 1% on all earnings above 4,615, plans which received the backing of ministerial colleagues in Downing Street.

Mr Brown said the extra money for the NHS would come hand-in-hand with more scrutiny of how it was spent.

He added:: "It is right that everyone who benefits from the insurance provided by the NHS... should make a fair contribution."

What are the implications of this year's Budget for you?

You put your post-Budget questions to economist Mark Pragnell of the Centre for Economic and Business Research and Patrick Stevens, tax partner at Ernst and Young, in a live forum presented by the BBC's Economics Reporter Dharshini David.


The topics discussed in this forum were:

  • Child Tax Credit
  • Single parents
  • Stamp Duty
  • Prescription charges
  • Further Child Tax Credit details
  • Vehicle Excise Duty
  • Company Cars
  • Amateur Sports Clubs
  • Timescale of NI increases
  • Small companies
  • Inheritance Tax


    Child Tax Credit


    Dharshini David:

    Alison Ackers, UK: Does the new Child Tax Credit replace the working Families Tax Credit, Children's Tax Credit and Child Benefit? Gordon Brown was not specific enough about this.


    Patrick Stevens:

    As with most of these things there's not a completely straight-forward answer but let's try and dispel some of the myths straight away. First of all, Child Benefit - that's the bit which you go down to the Post Office and get every week or month - that is going to remain in place. It is not affected by any of these changes in tax credits and it goes to every single family.

    What we have got is that the current Working Families Tax Credit and the current Children's Tax Credit is going to be replaced by the Working Tax Credit and Child Tax Credit. Very close words there so lots of people are going to get confused. But in doing so, this new Working Tax Credit is going to take over from the Working Families Tax Credit but it is going to wrap up as well lots of the other allowances that are about at the moment. For example, Income Support, Job Seeker's Allowance, Disabled Person's Tax Credit - all of that gets wrapped up in this one new working tax credit - it is basically an umbrella term.


    Dharshini David:

    Can I ask you both - and this is something that I wondered about when I was watching the speech. John Gasgoine in the UK asks: How do taxpayers, (single, couples or families), apply for, or receive the tax credits? Are they automatic or do you have to apply for them?


    Patrick Stevens:

    That, you might think is one of the most difficult bits about it all. The only way you're going to get this - and there are going to be a lot of people who are due to get it - is to actually apply. You've got to find the forms - get the forms from the Inland Revenue, fill them in and send them off. Let's be fair to the Inland Revenue, they are helpful - they do try to be of assistance to all taxpayers and they really do their best. But just to get individuals who are due this money into the system is going to be a real task here. You can do it on online but I'm not sure that's going to help the majority of people who are going to do this because what it's doing is taking generally the lowest earners in the country who are due these sort of allowances and bringing them into a whole, what's effectively, a self-assessment tax system and that's going to be quite complicated.

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    Single parents


    Dharshini David:

    Leanne Hamill, Northern Ireland: I am a single parent, working full-time. I earn 170 per week and I am paying 95 per week childcare costs. Am I and other single parents going to benefit from this Budget?


    Patrick Stevens:

    She is probably going to be an example of one of the biggest winners. We can't work out all of the details because we haven't got all of the details yet. Do remember these changes don't come into effect until a year from now - April 2003 is when the big changeover takes place. But the bit which she will win on is that in the new Working Tax Credit, there's going to be an element - there's lots of elements that make up the total amount that you get - for childcare costs and that's going to be something really different from previously and may well be a benefit for that questioner.

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    Stamp Duty


    Dharshini David:

    Perpetua Trainor, Northern Ireland: Can anyone explain to me in layman's terms the Chancellor's statement regarding Stamp Duty? I am anxious to know as I am soon to be a first-time buyer.


    Mark Pragnell:

    One thing that's for certain, I don't thing the Chancellor's statement was in layman's terms. We have had a look through it and effectively, I am afraid there's no great news here for anyone who is going to be buying a home or moving homes in the near future.

    In terms of all the things that were said yesterday in terms of Stamp Duty, it is Stamp Duty that relates to Stamp Duty paid by businesses and not by homeowners. Effectively, what we're going to see over the next few months are changes to loopholes in Stamp Duty - which are loopholes being taken by businesses who are using Stamp Duty on property as a way of being able to hide potential revenues that could be due to the Inland Revenue and the Chancellor is going to avoid those now with the Stamp Duty reforms.

    What he is going to do and a lot of what he was saying yesterday does relate indirectly to residential property owners - what's going to happen in the next Finance Bill - the Finance Bill in 2003 - is he is going to come out with some ideas in terms of how conveyancing can be done electronically. It means that things like making sure that Stamp Duty is actually collected correctly will be a lot easier because it will all be online and the Government can keep a track on what you're doing. But a lot of what was said yesterday about Stamp Duty is actually to do with trying to move everything, in terms of conveyancing, electronic post-2003 - probably we'll see the effects of that in 2004/2005.


    Dharshini David:

    Darren Skirrow, England: What happened to raising the threshold on Stamp Duty? It currently stands at 60,000 and was expected to be raised to 85,000. No such luck, just as I'm about to purchase a house within this price range. Was this meant to happen?


    Mark Pragnell:

    There were lots of things that people thought the Chancellor would do - he did very few of them in fact and he certainly didn't move the allowances in terms of Stamp Duty.

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    Prescription charges


    Dharshini David:

    Judie, UK: I've heard something about prescription exemptions somewhere in the speech. As someone who can't afford my medication without exemption. I am worried. What exactly was said and what will it mean?


    Mark Pragnell:

    I can't find that one at all - it may be there. I have been wading through not only the Chancellor's speech - the Chancellor also produces through the Treasury the Budget Book - it's called the Red Book - it used to be red but it is actually white nowadays. On top of that the Inland Revenue, Customs & Excise and a fair number of other departments also produce press releases which provide even more information - wading through all of these I couldn't find anything on prescription exemptions.

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    Further Child Tax Credit details


    Dharshini David:

    Moving back to you Patrick. Mary Tregellis, England: I am a carer of a disabled child. My husband earns 35,000 per year. How can I claim the Child's Tax Credit when I only receive a carer's allowance?


    Patrick Stevens:

    We don't have the details on amounts that you'll be able to get but we talked about how you claim earlier on. She is going to have to get the right forms, fill them in, send them off to the Inland Revenue - do it on the web if that's what she wants to do. It sounds as though it may be possible for her to get an allowance in this way. You have to take into account her husband's income as well as any that she might have.

    Just while we're on that, a major change that will take place there is that at the moment all of these tax credits - Working Families Tax Credit, Children's Tax Credit - all gets put into the earner's wage packet and it's only the Child Benefit that goes directly to the carer. In future, or from next year, the Working Tax Credit will go into the wage packet of the earner but the Child Tax credit - the other element of it - will come direct to the carer. So that you may think of as being quite a benefit. In the case you've got there, it means there should be some lump of money coming directly to the mother who is the questioner.

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    Vehicle Excise Duty


    Dharshini David:

    Road tax for cars. S Burtenshaw (it's also been put by Stuart in the UK): I notice that road tax for cars, vans and lorries have been frozen. No mention was made about motorcycles, was that an oversight or are there still plans to increase road tax on large engine motorcycles as has been rumoured?


    Mark Pragnell:

    There has actually been changes in vehicle excise duty on motorcycles and for some motorcyclists they are actually paying less now or will be paying less from May 2002 - for the road disc. What will come into place in May 2002 and it goes in bands of different size of engine: For motorcycles up to 150cc., the vehicle duty will be 15. In the next band which 151cc to 400cc, you'll be paying 30. It's going to be 45 for 401cc to 600cc and for the very biggest bikes you are going to be paying 60 from May 2002 in terms of vehicle excise duty. So this is very much actually matching what is happening elsewhere in the motor vehicle taxation that was announced yesterday - very much incentives for using smaller bikes, smaller vehicles - smaller engines which are less polluting in theory.

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    Company Cars


    Dharshini David:

    Staying on the issue of vehicles. Clive Manning, England: What changes have been made to company car drivers are they going to be hit again?


    Mark Pragnell:

    In terms of company car drivers, actually most of what's going to happen to company car drivers was announced some years ago in fact. Starting this financial year, we are going to see a major overhaul in terms of company car taxation. But effectively what is going to happen is the amount of tax you pay for your company car will depend upon how much carbon dioxide it emits. So the bigger polluting car you have, the more tax you will pay.

    The way that works - and you can get hold of the information from any motoring magazines who publish what the emissions are for most new cars - for new cars you will find that the amount of tax you pay in terms of a percentage of the value of the car which is then attributed as an additional income that you receive through the company car - that will be based upon how much it pollutes. So typically if you buy a smaller car or if you buy a car with a smaller engine or if you buy a car with an efficient engine then you'll find that you'll find that you'll be paying less tax.

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    Amateur Sports Clubs


    Dharshini David:

    Bill Muirhead, UK: What are the tax breaks for amateur sports clubs that the Chancellor was talking about yesterday?


    Patrick Stevens:

    Community amateur sports clubs. So provided your club is firstly open to the community generally; secondly for amateurs rather than professionals and thirdly is in one of the normal sports - to be frank I haven't gone through all the lists but I think it will cover most normal sports - then you're going to get some extra tax exemptions. The one which people are always worried about was that if the club gathered together a bit of cash and put it into an investment bank account, you generally got taxed on the interest. Now that has moved over to as though you were a charity. Charities are exempt from tax on interest income, so with these community amateur sports clubs be. There are some other exemptions for small limited amounts - any trading profits if you ran some kind of event or in some cases when you rent out a bit of ground - will also be exempt from tax.

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    Timescale for NI increases


    Dharshini David:

    Gary Turner, UK: When will these actual rises in National Insurance take place?


    Patrick Stevens:

    This is typical Gordon Brown - so he trailed his Budget for the last few weeks - all the hints have been in the newspapers that he's going to hit us with more tax or National Insurance etc - he now brings it in maybe not quite as bad as people were generally expecting and it doesn't come in until 5th April next year. So there's a year for us to get used to it before it actually hits us in the wage packet.

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    Small companies


    Dharshini David:

    Jim Hamilton: There is much talk about small businesses but all this appears to relate to limited companies and not to self-employed or partnerships. What is there in the Budget for them?

    Malcolm Sayers: I saw something on the TV something to do with cash being offered for small businesses who are online. Can you please tell me anything about this?


    Mark Pragnell:

    I'll go with the online one. I think unfortunately it's not just businesses online - it is businesses that are on online to fill in their payroll and send off their PAYE is the issue here. It's less actually less to do with help for small businesses. It's more to do with making sure that big business end up filing their PAYE electronically over the internet. From 2004/2005 all companies over 250 staff will be required to file their PAYE returns electronically, over the internet. Smaller companies over 50 will have to do that by 2005/2006.

    But after a fair bit of lobbying, the Chancellor has given a much longer lead time for smaller businesses to move over to electronic filing and it is only going to be in 2009/2010 that the smallest businesses will have to file PAYE electronically. But before then he is going to provide a little incentive to get people to move across earlier. So in the financial year, 2004/2005, if you are a small business under 50 employees and you file electronically, you'll get 250 and by 2008/2009 he will reduce the amount which you get so that by this time that comes down from 250 to 75.

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    Inheritance Tax


    Dharshini David:

    David Cornwallis, UK: Could you tell me if Gordon Brown altered any of the Inheritance Tax percentages or the time between gifts and death, previously 7 years? Has this changed?


    Patrick Stevens:

    At the present time the rules are really very generous. If you make a gift to your family, children or whatever and provided you survive for the next 7 years, there is absolutely no tax on that whatsoever and that remains in place. The only very small thing that he has done is that the threshold - that is the limit at which on death you don't have to pay any tax on - has gone up from 242,000 to 250,000 so not a very exciting change. But being able to make a gift during lifetime means that for many of the wealthiest people in the country, inheritance tax is still quite a voluntary sort of tax.

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