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Overview -“It’s the way he tells them”. 

• An uncritical voter listening to the radio around 4pm on budget day could be forgiven for believing that all his/her Christmases and birthdays had come at once.
• There is of course a significant slight of hand in that there is a tendency to announce tax increases well in advance and with little fuss while cuts are the subject of heavy and sustained publicity.
• The funds generally come from attacks on the usual vices (petrol and cigarettes) and a previously announced hefty increase (from 10% to 12.2%) in the employer’s NI “payroll tax”.
• Overall Mr Brown claimed £4bn tax cuts and £2bn of additional spending. In a (perhaps) pointed reference to his own continuing bachelor status he removed the remaining income tax benefits of marriage.

Income Tax

• For 1999/00 the basic personal allowance is £4,335. The first £1,500 of taxable income is taxable at the starting rate of 10%, the 20% rate has been abolished and the higher rate begins at £28,000. The tax rate on savings will continue to be 20% and 40% respectively for basic and higher rate taxpayers except for dividends for which the rates will be 10% and 32.5%.
• The personal allowances for pensioners have been increased by more than the indexed amount to £5,720 (aged 65-74) and £5,980 (75 and over), the income limit for age related allowances rises to £16,800.
• From April 2000 the basic rate of tax will be reduced from 23% to 22%. At the same time the Married Couple’s allowance will be abolished except in the case where one of the couple is 65 or over on 6th April 2000.
• From April 2001 a children’s tax credit (£4,160 at a rate of 10%) will be introduced. This will be gradually withdrawn where one or both of the parents is a higher rate taxpayer.

Benefits in Kind

• The benefit in kind charge for cars remains the same (35% of list price) for less than 2500 business miles but the other charges increase, 2,501 to 18,000 business miles to 25%, over 18,000 business miles to 15%. In addition the discount for cars older than 4 years is reduced from one-third to one-quarter.
• The £200 charge for employer provided mobile phones is removed.
• To promote the use of “green” transport there will be no benefit in kind charges on employer provided bus services or the provision of bicycles and safety equipment for transport between home and work. The tax free mileage rate for bicycles used for business is to be 12p.
• No benefit will be charged on the provision of computers to employees by employers. If the benefit would exceed £2,000 then the excess will be taxed. The exemption will not apply if the provision is confined to directors and senior staff.Reliefs
  Mortgage interest relief is continued at a rate of 10% on the first £30,000 for 1999/00 and is then discontinued from 6th April 2000. From budget day the relief available for loans to purchase life annuities is withdrawn, the relief for existing loans will continue at the current rate for the life-time of the loan.
• The earnings limit for personal pensions is increased to £90,600.

National Insurance

• From April 1999 no contributions will be due from either employer or employee on earnings below the lower earnings limit (currently £66 pw ). For employers there will be two bands, from £66 to £83 attracting a nil rate and above £83 at a rate of 12.2%.
  When a “carbon tax” is introduced from April 2001 the employers’ rate will be reduced to 11.7%.
• The upper earnings limit for employees contributions from April 1999 is £500pw increasing to £535pw in April 2000 and £575pw in April 2001.
• From April 2000 a nil rate band for employees will be introduced between the current lower earnings limit and £76. From April 2001 this threshold will be aligned with the personal tax allowance.
• National Insurance for the self-employed will be reformed from April 2000. The class 2 contribution will be reduced to £2 per week and the class 4 contribution of 7% will be charged on earnings between the personal tax allowance and the upper earnings limit.
  From April 2000 the employers NIC on benefits will be extended from cars and fuel to all taxable benefits.

Individual Savings Accounts

• From April 1999 for a minimum period of 10 years a maximum of £5,000 per annum may be invested tax free in an ISA. In the first year this limit is increased to £7,000. In addition any existing PEPs maybe retained and will attract the same tax benefits as ISAs while the amount held in a TESSA may be transferred to the ISA.
• TESSAs will continue to be available until 5th April 1999 and once opened the saver may make contributions under the existing rules for the full five-year life.
• Caution should be exercised when investing in cash based ISAs since this may restrict the level of investment in equity based ISAs (the terms mini- and maxi- may be used).
• It is perhaps indicative of the frustration with potential providers that this budget announced that the FSA will begin to provide league tables of the charges made by providers. This may bring light to bear on some of the murkier corners of the financial services industry.

Capital Gains Tax

• The annual exempt amount is increased to £7,100. The rates of gains tax are reduced from three (20%, 23% and 40%) to two (20% and 40%).
• Taper relief for serial investments in EIS will accumulate so that when the proceeds from one investment are reinvested in another EIS the period for taper relief will be from the date of the first investment.
• Retirement relief is being phased out over a period of five years. The exempt and half-exempt amounts for 1999/00 are £200,000 and £600,000 respectively.
• A new employee share scheme is to be introduced which will allow allocation of pre-tax income to purchase shares in the employer. If the shares are held for three years then the only tax charge will be income tax on the amount allocated for the purchase, NIC on the purchase price will be avoided and there will be no charge for any gains made while the shares are held within the scheme.

Corporation Tax

• First year capital allowances for investment in plant and machinery at 40% for small and medium sized enterprises are extended for a further year to 1st July 2000.
• From 1st April 1999 the main rate of corporation tax is to be reduced to 30% and the small companies rate to 20%.
• From 1st April 2000 the first £10,000 of profits will be taxed at 10% and profits between £10,000 and £50,000 will be subject to marginal relief. The taxation of service companies will be amended to avoid them benefiting from this change.
• As previously announced the recovery of tax credits by others (individuals etc.) will cease from April 1999 and the tax credit will be reduced to 10%. There will be a further five-year transitional period for charities financed from public funds.

Stamp Duty

• The rate of stamp duty on property sales above £250,000 is increased to 2.5% and for sales above £500,000 to 3.5%. This has effect from 16th March 1999 except for transfers made in pursuance of a contract made on or before 9th March 1999.

Value Added Tax

• The registration threshold is to be increased from £50,000 to £51,000 with effect from 1st April 1999, the deregistration threshold similarly increases to £49,000.
• There are numerous changes of an anti-avoidance nature and to reverse recent legal decisions (particularly the adverse decisions)

Other Taxes

• The insurance premium tax increases by 1% to 5% from 1st July 1999.
• The nil rate band for inheritance tax is increased by £8,000 to £231,000 from April 1999.
• The standard rate of Landfill tax increases from £7 to £10 per tonne from 1st April 1999. It will then increase by a further £1 per tonne in each of the next five years.

Welfare Reform

• The working family’s tax credit when it is introduced in October will be at £200pw (previously announced at £190). Child benefit will increase to £14.40 (from April 1999) and then to £15 from April 2000 for the first child and £10 (from April 2000) for the second child and (as yet) will continue to be untaxed.
• All mothers in work earning more than £30pw will in future be entitled to maternity pay (for the full 18 weeks). This will particularly be relevant for those in part-time employment.

Duties

• The duties on tobacco and fuel have been increased by the previously announced escalations above inflation.
• Road Tax on cars of up to 1100cc is reduced to £100 from 1st June 1999 and increases to £155 for other cars.
• Alcohol duties, except for the duty on strong ciders, will be frozen, no doubt in the hope that in the resulting alcoholic haze no one will ask how much of their money has been spent on the millennium dome and similar publicity stunts.
• Pools betting duty is reduced by 9% to 17.5%.

Football (Ian insists this is important)

• The effects of FRS10 (Accounting for Intangibles) are that Football clubs will have to amortise the payments for players over the life of contracts rather than write them off immediately (given the actual quality of players bought by Bradford City the latter seems the more sensible policy). A concession is made that the tax treatment for amounts already written off will be retained.

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