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Budget Comment March 2001

Introduction

The main question arising from this Budget is: how does the Press manage to write so many column inches?

Once you clear away the spending bits, the political bits, the measures coming in over a year from now (unless there is a change of Government!) and the technical changes to existing legislation, there is nothing to comment on.

Instead we set out:

  • Rates and Allowances for 2001 and 2002
  • Measures previously announced that start on 6 April 2001
  • Some Politics
Rates and Allowances

Rates and allowances for income tax, corporation tax, capital gains tax, inheritance tax and the pension schemes earnings cap are set out below.

2000-01 (£)

2001-02 (£)

Increase (£)

Income tax allowances
Personal allowance
Personal allowance for people aged 65-74
Personal allowance for people aged 75 and over

4,385
5,790
6,050

4,535
5,990
6,260

150
200
210

Income limit for age-related allowances

17,000

17,600

600

Married couple’s allowance for people born before 6 April 1935
Married couple’s allowance –aged 75 or more
Minimum amount of married couple’s allowance

5,185

5,255

2,000

5,365

5,435

2,070

180

180

70

Children’s tax credit

-

5,200

-

Capital gains tax annual exempt amount:
Individuals etc
Other trustees

 

7,200
3,600

 

7,500
3,750

 

300
150

Inheritance tax threshold

234,000

242,000

8,000

Pension schemes earnings cap

91,800

95,400

3,600


Taxable bands 2000-01 (£)

Taxable bands 2001-02 (£)

Starting rate 10%

0 – 1,520

Starting rate 10%

0 – 1,880

Basic rate 22%

1,521 28,400

Basic rate 22%

1,881 – 29,400

Higher rate 40%

Over 28,400

Higher rate 40%

Over 29,400


Corporation tax profits 2000-01 and 2001-02 (no change) (£)

Starting rate 10%

0 – 10,000

Marginal relief

10,001 – 50,000

Small companies’ rate 20%

50,001 – 300,000

Marginal relief

300,001 – 1,500,000

Main rate 30%

1,500,001or more

The main rate of corporation tax for 2002-03 is unchanged at 30 per cent.

National Insurance

2000/2001

2001/2002

 Class 1 Employees
On first £76 pw Nil £87 pw Nil
Between £76 - £535 pw 10% £87 - £575 pw 10%
Over £535 pw Nil £575 pw Nil
 Class 1 Employers
On first £76 pw Nil £87 pw Nil
Between £76 - £575 pw 12.2% £87 - £575 pw 11.9%
Over £535 pw 12.2% £575 pw 11.9%
Class 2 Self employed
 Flat rate £2 pw £2 pw
Class 3 Voluntary
 Flat rate £6.55 pw £6.75 pw
 Class 4 Self employed
On profits between £4,385 - £27,820 pa 7% £4,535 - £29,900 pa 7%
(maximum annual contribution) £1,640 £1,776
Measures previously announced that start on 6 April 2001

Nowadays the Chancellor’s Taxation announcements usually take effect over a year after the Budget. A good example is the ‘replacement’ of the Married Allowance with Children’s Tax Credit. The fact that there was a gap year between the abolition of the one and the introduction of the other was not headline news. But this slight of hand saved the Treasury around £2 billion and cost nothing in adverse comment. Not bad for an afternoon’s work!

Here are the big changes announced some time ago:

  • Pensions
  • Children’s Tax Credit
  • National Insurance: see the above chart.
Some Politics

The FT on 10 March 2001 showed a comparison of the three major parties attitudes to Personal Tax. The most striking was the difference between Labour and Tory on the subject of Inheritance Tax.

Apparently one of them has no plans for the tax, the other has plans to increase the exempt amount from £242,000 to £500,000, and give special exemption for primary residences. Email: BlytheTax and be surprised which is which…

Both Labour and Tory favour the recent move from Benefits to Tax Credits (like the new Children’s Tax Credits). We support the politics of this, but we are not sure what to think about the fact that it will require maybe 2 million more people to complete Tax Returns!