9 April 2003

PERSONAL TAXATION

Income tax allowances and reliefs and credits 2003-04 2002-03 Personal allowance (basic) £4,615 £4,615 Personal allowance (65-74) £6,610 £6,100 Personal allowance (75 & over) £6,720 £6,370 Married couple's allowance (basic) at 10%* £2,150 £2,110 Married couple's (under 75) allowance at 10% * £5,565 £5,465 Married couple's (75 & over) allowance at 10% £5,635 £5,535 Age allowance income limit    Extra allowance reduced by £1 for every £2 of income over £18,300 £17,900 Child Tax Credit/Children's tax credit value (CTC) £545 £529    Higher CTC for babies: for the first 12 months £1,090                Higher CTC for babies: the first tax year     £1,049    2003/04: CTC reduced by £1 per £15 of joint income over £50,000        2002/03: CTC reduced by £1 per £15 of either income taxed at higher rate     Blind person's allowance £1,510 £1,480 Rent-a-room tax-free income £4,250 £4,250 Enterprise Investment Scheme (EIS) at 20% ** £150,000 £150,000 Venture Capital Trust (VCT) at 20% ** £100,000 £100,000

*Where either claimant was born before 6th April 1935
**Also eligible for CGT reinvestment relief - unlimited for EIS only

Income tax rates 2003/04 2002/03   £ £ Starting rate 10% on first 1,960 1,920 Basic rate 22% on next 28,540 27,980 Higher rate 40% on income over 30,500 29,900 Interest/savings income for basic rate taxpayers 20% 20% Dividends: basic rate taxpayers 10% 10%   higher rate taxpayers 32.5% 32.5% Certain trusts, eg discretionary trusts: Dividends 25% 25%   Other income 34% 34%

Adoption allowance and foster carers

Payments of financial support under the new Adoption and Children Act 2002 are exempt from tax from 6 April 2003. Payments under the old legislation will continue to be exempt.
From 6 April 2003, foster carers are exempt from tax on gross receipts from foster care up to a limit of £10,000 a year for each residence, plus £200 a week for each child aged under 11 and £250 a week for each older child. If the gross receipts are greater, the carers may choose to calculate their profits under the normal tax rules or treat the excess over these limits as profit.

Domestic workers and personal service companies

The intermediaries legislation (commonly referred to as IR35) will be extended to cover domestic workers (eg nannies) who provide their services through an intermediary, such as a company. For income tax, the change will be effective for payments received by the intermediary in respect of services provided after 9 April 2003. For NICs, the change applies from a date that will be contained in regulations to be introduced after Royal Assent.

Life assurance taxation

Several changes to the treatment of life assurance policies have been announced, including:

Any tax charge which arose before 9 April 2003 because of multiple claims under certain group life assurance policies has been retrospectively abolished. No tax charge will arise on such group policies from 9 April 2003, as long as certain conditions are met.

From 9 April 2003, loans that are taken in connection with life policies by trustees of certain will trusts and other trusts will be taxed as if they were part surrenders of the policy.
The exercise of an option to reinvest a policy's maturity proceeds in a new policy will no longer result in the deferral of any tax charge. This is generally effective from 9 April 2003.

Charitable giving

From 2003/04, individual self-assessment taxpayers may nominate on their tax return a charity to receive all or part of any tax repayment. The individual may also indicate that Gift Aid should apply to the donation.
The payroll giving 10% supplement will be extended for a further year to 5 April 2004.

Residence and domicile

The Treasury and Inland Revenue have published a 'background paper' on residence and domicile. It contains a broad statement of key principles for any reform, but no legislative proposals.

Relevant discounted securities (RDS)

With effect from 27 March 2003, the tax treatment of RDS has been aligned more closely with normal interest-bearing securities and anti-avoidance measures will take effect.

Child trust fund (CTF)

Children born from September 2002 are entitled to a Child Trust Fund payment from the government of £250, or £500 where their families qualify for the full Child Tax Credit. Additional payments by parents and others may be made up to a total of £1,000 a year. The child can have access to the fund, with no restrictions, from age 18.

Further details, including product specifications and sales regulations, will be published in summer 2003. Accounts are expected to be available by 2005 from authorised providers.

This summary has been prepared very rapidly and may contain errors for which we cannot be held responsible. The proposals are in any event subject to amendment before the Finance Act is passed.

BACK TO MENU