Tax Overview
| Personal Allowances | £ |
| Basic | 4895 |
| Age 65-74 | 7090 |
| Age 75 & over | 7220 |
| Married couples basic | Nil |
| Married couples 65-74* | 5905 |
| Married couples 75 & over* | 5975 |
* restricted to 10%
| Income Tax Rates after Personal Allowance | £ |
| Starting rate 10% | 0 - 2,090 |
| Basic rate 22% | 2,090 - 32,400 |
| High Rate 40% | Over 32,400 |
Income Tax
The basic rate of tax is 22%, as announced in the Budget. However, between 1992/93 and 1999/2000 the number of 40% taxpayers rose by a third, as earnings outpaced the rise in the threshold for higher rate tax. (HM Revenue & Customs and ONS). In 2005/06 you may discover that you too have joined the higher rate taxpaying club.
Married Couples Allowance
The demise of the married couple's allowance had been widely noted, not least because the rate of relief had now fallen to 10%. Mr Brown confirmed that the married couple's allowance disappeared from 6th April 2000, adding an extra £197 to most couple's tax bills. However, the special married couple's age allowance will remain, provided at least one spouse was born before 6th April 1935.
Inheritance Tax (IHT)
At a time when double digit rises in property prices are being widely reported, the nil rate band for inheritance tax was increased to £275,000. However, in many parts of the country, that exemption does not even cover a family home.
Mr Brown made no other revisions to inheritance tax. In his seventh Budget with no radical change to IHT, it seems likely that the Chancellor has decided to live with the current regime rather than undertake the reforms many commentators had long predicted. The stability of the tax structure means that now is a good time to review your IHT planning strategy.
If you arranged Life cover some years ago to protect your Estate, it may have to be reviewed to cope with the rise in property and investment values and the more competitive life rates now available.
With the new academic year in September, and with it yet another change in the financial support regime for students. For students, the maximum fee contribution will increase to £1,175 per year.
As of 2006, students will not have to pay for course fees whilst they are registered on the course. A student loan will be available that matches the level of tuition fees that has to be paid. This loan will then have to be repaid in a similar manner to the existing system, when the graduate begins earning £15,000 or more per year.
There are now grants available for new students to cover maintenance and accommodation and the planned off-setting of tuition fees are good news for students. The new scheme will be available to everyone.
The greater availability of loans is something of a double-edged sword. It should make life easier for those students who find that their parents are not willing (or able) to provide the assistance that the Department of Education and Skills deems appropriate. On the other hand, it will mean students will almost certainly have accumulated even larger debts by the time they graduate.
(Figures source: HM Revenues & Customs, correct June 2005)
