The taxman's pinch is only a matter of time: A guide to the changes: who they hit and when the agony begins

The full effects of Norman Lamont's two-stage Budget will not be felt for another year when the National Insurance rise and curbs on higher-rate tax relief will start to bite.

As our examples show, married people with earnings of pounds 8,000 could be better off in the next tax year if they did not smoke. But even giving up cigarettes and beer the next year will not redress the balance.

The higher-rate taxpayer will feel the effect immediately from changes in dividend taxation and the treatment of company cars. The blows to the married couple's allowance and to mortgage tax relief will pile on the agony a year later.

Here is a checklist:

TAXATION

Tax Bands: the 20 per cent band increases by pounds 500 to cover the first pounds 2,500 of taxable income. But the point at which 40 per cent tax becomes payable remains at pounds 23,701.

Allowances: all are frozen. Up- rating according to the Rooker Wise convention based on the December inflation figure of 2.58 per cent will not take place.

Married Couple's Allowance: the allowance, worth pounds 1,720, can be set off against your highest tax rate for the coming tax year, but in the following year relief will be restricted to 20 per cent. This will also apply to single parent and widow's allowances.

For employees this change will be operated by altering the PAYE code. So, while 20 per cent taxpayers will see the pounds 1,720 on their code to produce an income boost of pounds 344, 25 per cent payers will have an allowance of pounds 1,376, and 40 per cent taxpayers a figure of pounds 860, to produce the same cash benefit.

INVESTMENT

Capital Gains Tax: the allowance remains at pounds 5,800, and gains are charged at an individuals' top tax rate.

Dividends: A key change in the taxation of companies results in net dividends being paid out with a 20 per cent tax credit rather than a 25 per cent credit from April. Basic rate taxpayers' liability on these dividend payments will be reduced to 20 per cent, so they will be no worse off. But higher-rate payers will have to pay extra tax.

Elderly shareholders who need to gross up their income to calculate their eligibility for age allowance will have to remember to use the new tax credits.

Pensions: pension fund income from dividends will be cut by the change, and they will only be able to boost net dividends by 20 per cent rather than 25. If returns within tax-free pension funds are cut, those investing in personal pensions should consider investing more. Company funds will also be affected.

Personal Equity Plans: Peps are in a similar position to pension funds and will see their dividend income cut by 6.25 per cent. But although the attraction of investing via a Pep is diminished, as long as charges are kept down it should still be worth holding equities, unit trusts or investment trusts within a Pep.

PROPERTY

Miras: relief on mortgage interest is already restricted to the 25 per cent basic rate. In a year's time the tax relief will be cut to 20 per cent. At current interest rates this will cost a 25 per cent taxpayer, with a mortgage of pounds 30,000 or more, pounds 120 a year or pounds 10 a month.

Stamp Duty: the threshold where stamp duty becomes payable on house purchases doubles from pounds 30,000 to pounds 60,000. The average first-time buyer outside London will escape the 1 per cent duty.

Company Cars: tax charges will be related to the list price, including accessories, rather than to engine capacity. The Revenue says it will be watching for anyone who buys a car 'without seats and doors and has them fitted at the first service'.

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