Budget 2005

On March 16th the Chancellor delivered his Budget, so what changes might be relevant to your 2005/06 tax bills?

Income Tax
The tax-free personal allowance is now £4,895, there were no changes in the rates of tax and the tax bands have only increased in line with inflation.
10% on the first £2,090 of taxable income, 22% on the next £30,310 and 40% on taxable income over £32,400.

National Insurance
Only the threshold has changed, the rate remains the same.
The NI-free amount is now £94 per week and 1% NI is now from £630 per week. Earnings between £82 and £94 per week protect the entitlement to basic state retirement benefits without incurring liabilities to NI. A PAYE number would needed to establish the employee’s entitlement to benefits.

Capital Taxes
The tax-free gains amount for 2005/6 is £8,500 and gains on sale of Principal Private Residence will continue to be exempt from Capital Gains Tax. The Inheritance Tax nil-rate band has also been increased to £275,000, so if utilised effectively that’s £110,000 (£275,000 x 40%).

Stamp Duty Land Tax (SLDT)
From March 17th 2005 the SLDT zero-rated threshold for all residential home buyers will double to £120,000. The SLDT zero-rate threshold for business emains at £150,000 in Enterprise Areas. Unfortunately buyers entering into a commercial land transaction in an Enterprise Area from March 17th will no longer be able to claim the disadvantaged areas relief.

VAT on private fuel
The scale charge per quarter, per car has increased; luckily you don’t have to use the new rated until your first return that starts after May 1st.