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Budget Comment March 2002
Introduction

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

Apart from the dramatic increase to National Insurance, once you clear away the spending bits, the political bits, the measures coming in over a year from now and the technical changes to existing legislation, there is little to comment on.

The chart of new Rates and Allowances is, as always, set out below.

Rates and Allowances for 2002 and 2003

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

2000-02 (£)

2001-03 (£)

Increase (£)

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

4,535
5,990
6,260

4,615
6,100
6,370

80
110
110

Income limit for age-related allowances

17,600

17,900

300

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

5,365

5,435

2,070

5,465

5,535

2,110

100

100

40

Children’s tax credit

5,200

5,290

90

Capital gains tax annual exempt amount:
Individuals etc
Other trustees

 

7,500
3,750

 

7,700
3,850

 

200
100

Inheritance tax threshold

242,000

250,000

8,000

Pension schemes earnings cap

95,400

97,200

1,800


Taxable bands 2001-02 (£)

Taxable bands 2002-03 (£)

Starting rate 10%

0 – 1,880

Starting rate 10%

0 – 1,920

Basic rate 22%

1,881 – 29,400

Basic rate 22%

1,921 – 29,900

Higher rate 40%

Over 29,400

Higher rate 40%

Over 29,900


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

Starting rate Zero %

0 – 10,000

Marginal relief

10,001 – 50,000

Small companies’ rate 19%

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 2003-04 is unchanged at 30 per cent.

National Insurance changes from 6 April 2002

2001/2002

2002/2003

 Class 1 Employees
On first £87 pw Nil £89 pw Nil
Between £87 - £575 pw 10% £89 - £585 pw 10%
Over £575 pw Nil £585 pw Nil
 Class 1 Employers
On first

£87 pw

Nil £87 pw Nil
Between

£87 - £575 pw

12.2% £87 - £585 pw 11.8%
Over

£575 pw

12.2% £585 pw 11.8%
Class 2 Self employed
 Flat rate £2 pw £2 pw
Class 3 Voluntary
 Flat rate £6.75 pw £6.85 pw
 Class 4 Self employed
On profits between £4,535 - £29,900 pa 7% £4,615 - £30,420 pa 7%
(maximum annual contribution) £1,776 £1,806
National Insurance Rates 2003-04

For the year 2003/04 there will be an additional 1% contribution on all earnings above the threshold of £89 per week. This 1% applies to employees, employers and the self-employed. This is in addition to existing rates of contribution below the upper earnings limit for employees and the upper profits limit for the self-employed.

This means that the starting point for both employers’ and employees’ NICs in 2003-04 will be £89 per week and no employee will pay NICs on earnings below this amount. Rates and thresholds are set out below.

2002-03

2003-04

Primary threshold

£89 per week

£89 per week

Secondary threshold
£89 per week
£89 per week

Employees’ primary class 1 rate on earnings between primary threshold and upper earnings limit

10%

11%

Employees’ primary class 1 rate on earnings above upper earnings limit

1%

Employers’ secondary class 1 rate on earnings above secondary threshold

11.8%
12.8%

Lower profits limit (for self-employed Class 4 contribution)

£4,615
£4,615
Class 4 rate on profits between lower and upper profits limit

7%

8%

Class 4 rate on profits above upper profits limit
-
1%