Five Budget giveaways that you can't afford to go without
Brown's latest Budget was all about the bigger picture, but David Prosser spots gains worth claiming
Saturday 25 March 2006
Gordon Brown's 10th Budget was short on specific policy announcements. Even the notes that accompany the Budget - usually a rich source of new measures - contained few surprises. As always, however, the Budget leaves taxpayers with a to-do list. Here are five measures that will leave some people better off - but act soon.
CHILD TRUST FUNDS
The scheme to give every child born since 1 September 2002 a savings fund is now even more generous. In addition to the £250 paid to babies (£500 for new-borns in low-income families), children will now get a second payment worth the same amounts at age seven.
However, parents must claim the money, and the latest figures show many have not. Just two-thirds of the 2.3 million vouchers sent out so far have been cashed. Families still to open an account should do so as soon as possible.
CHILD TAX CREDITS
These have enabled the Chancellor to help thousands of families on very low income out of poverty. But the administration of the scheme has been a disaster, with many families paid too much and then left in dire financial straits when HM Customs & Revenue has reclaimed the overpayments.
Advice groups now say that the system is sufficiently robust for parents to be confident about applying for what they are owed - many families have previously given up. On Wednesday, the Chancellor announced a 14 per cent rise in the child element of the child tax credit and the extra cash is worth claiming.
The Chancellor is to abolish the home computer initiative, which enables employers to provide their staff with PCs at home on a tax-efficient basis. Under the scheme, you buy a computer from your employer, typically over a three-year period. As the payments come from your pre-tax salary, in effect you get up to 40 per cent off the cost.
The good news is the scheme will be available for the rest of the current tax year, which ends on 5 April, so if your employer participates in the scheme, take advantage now.
In addition to tax breaks for environmentally-friendly cars (see page 4), the Chancellor announced help for people who conserve energy at home. There will be more money available to subsidise the cost if installing insulation in your property, plus grants for people who install sources of renewable energy in domestic homes. The Energy Savings Trust ( www.est.org.uk) can provide details of how you apply for this money.
REAL ESTATE TRUSTS
This is for the pending tray, as proposals for the new property investment trusts won't come into force until January. However, investors with ISAs and pension plans should take note: Reits will be an excellent way to add residential and commercial property exposure to portfolios.
Budget personal finances in brief
* Income tax: no change to tax rates, but tax allowances have mostly been increased in line with inflation. Working families with children will benefit from additional tax credits.
* Stamp duty: no tax payable on property transactions worth £125,000 or less, up from £120,000 previously.
* Inheritance tax: threshold for IHT to rise to £285,000 on 6 April and to £325,000 by the 2009/10 tax year.
* Motoring: vehicle excise duty bands reformed to encourage drivers to buy greener cars.
* Housing: expansion of shared ownership schemes confirmed, though only 35,000 buyers will benefit.
* Child tax fund: New payments of at least £250 at age seven for children born since 1 September 2002.
* Savings and investments: ISA allowances maintained, but tax breaks on venture capital trusts reduced (see page 15). Real estate investment trusts to be introduced next January,
* Pensioners: free bus travel for all pensioners across England from April 2008. There will be no £200 Council Tax benefit next year, although the winter fuel allowance will remain at £200.
How the new rules on trusts work
* While announcing a significant increase in the value of estates that may be passed on to heirs free of inheritance tax, the Chancellor is cracking down on two types of trust that he believes people have been using to avoid the tax. Accountants are furious.
* Most controversially, the rules have changed on accumulation and maintenance trusts set up for children. Typically, these trusts are set up to begin paying income to a child at 21, or even 25. They may not get the capital until much later.
* Now, however, inheritance tax will be payable on assets left via accumulation and maintenance trusts, unless the cash is handed over as soon as the child reaches 18.
* Similarly, lifetime interest trusts, which can be set up to provide an income for anyone you choose, have been outside the inheritance tax net. Now they'll be subject to the tax.
* Leo Joyce of accountant Blick Rothenberg urges anyone who has set up a trust to take urgent professional advice. "The Government said it was only concerned with preventing tax abuse, but what has happened in this Budget has gone well beyond that," he says.
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