Gordon Brown presented what may be his last pre-budget report to Parliament today. There are no dramatic surprises in the proposed changes to taxes, although the Chancellor has raised his tax take by £2bn. We have summarised below some of the announcements that directly affect the tax and other duties we pay.

As always if you need more information on any of the issues raised by the Pre Budget Report please call.

Income Tax Allowances

All income tax allowances are to be increased in line with inflation. For 2007-2008 the new rates are:

Personal Allowance - under 65 years £5,225
Personal Allowance - age 65 to 74 years £7,550
Personal Allowance - age 75 and over £7,690

The income limit for age related allowances is now £20,900.

National Insurance

Minor increases in the lower earnings limit and no increase to basic Class 1 contribution rates.

The self employed weekly contribution will rise by just 10p to £2.20. Class 4 contributions based on self employed earnings between £5,225 and £34,840 will continue to be charged at 8%.

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Savings - Reform of the ISA regime

• making ISAs permanent with an overall annual investment limit of £7,000.
• bringing Personal Equity Plans within the ISA rules
• allowing child trust funds to roll over into ISAs on maturity
• allowing transfers from the cash to stocks and shares component of ISAs.

Families with children

• From April 2007 the value of Child Tax Credit will increase by £80 to £1,845 per year.
• From April 2009 every mother-to-be  will become eligible for Child Benefit from week 29 of their pregnancy. The additional benefit will amount up to £200.

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Road fuels - increase in excise duty.

From 7 December 2006 the effective rate of excise duty for road fuels will be increased by 1.25 pence per litre. (This is in line with the inflationary increases published in the Budget 2006).  The same increase will be applied to bio-fuels. 

Air Passenger Duty Rates will be increased from 1 February 2007.

The new rates of duty will be:

• For the lowest class of travel:   Passengers flying to destinations in Europe will pay £10, to other destinations £40.
• For other than the lowest class of travel: European travellers will pay £20, to other destinations £80.

Extension to landlord's energy-saving allowance.

Individual landlords and corporate landlords who let residential properties and pay either income tax or corporation tax will benefit from the new proposals. The changes are:

• availability will be extended to 2015
• qualifying expenditure will now include installation of floor insulation
• the present maximum allowance of £1500 will be applied to each property rather than to each building, and
• the allowance will be made available to corporate landlords who let residential properties

These changes will take effect on or after 6 April 2007 but may be subject to State Aid clearances.

Free insulation and central heating

The Chancellor has pledged to offer a further 300,000 households free central heating and insulation.

Tax free energy sales.

If you have installed micro generation technology in your home, and receive payment from energy suppliers for the sale of surplus of power, you will be pleased to know that legislation is to be included in the Finance Bill 2007 to exempt this sale of surplus power from income tax.

This exclusion will not apply to cases where surplus power is sold in the course of a trade.

Zero Carbon Homes

The Pre Budget report has announced a time limited exemption from stamp duty for most new zero carbon homes. Full details will be issued in the 2007 Budget.

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UK Real Estate Investment Trusts (UK-REITs)

Measures are to be introduced on or after 1 January 2007 that will make it easier for newly established companies to become UK-REITs.

Anti-avoidance measures

Certain avoidance schemes that have been notified to HMRC, as now required by law, are to be closed as from 6 December 2006. They include arrangement to avoid corporation tax and use of particular capital losses.

Stamp Duty Land Tax Anti-avoidance measures.

A number of schemes designed to avoid stamp duty land tax will cease to be effective on or after 6 December 2006. There are transitional provisions to help those who entered into contractual commitments before 2 p.m. on 6 December 2006.

Construction Industry

In his Budget speech earlier this year the Chancellor delayed the introduction of the new Construction Industry Tax Scheme until April 2007. The Chancellor today confirmed that the new scheme will operate as stated from April 2007.

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DISCLAIMER - PLEASE NOTE: The ideas shared with you in this email are intended to inform rather than advise. Taxpayers circumstances do vary and if you feel that tax strategies we have outlined may be beneficial it is important that you contact us before implementation. If you do or do not take action as a result of reading this newsletter, before receiving our written endorsement, we will accept no responsibility for any financial loss incurred.

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