The Chancellor of the Exchequer Mr Gordon Brown presented his 2006 Budget on 22 March last.

Our colleagues in ICAEW have summarised the measures not previously announced at pre-Budget report time or otherwise:

Tax rates and allowances

New information announced on Budget Day

Budget Press Release PN02 sets out details of all the rates and allowances for income tax, National Insurance, tax credits and Child Benefit/Guardian's Allowance, corporation tax, fuel duties, alcohol and other duties, vehicle excise duties and stamp duty land tax. This information relates to 2006/07 and (in some cases) subsequent years.

VAT rate and threshold changes are dealt with in Budget Notes BN 39, 40, and 41.

Many of the rates and allowances set out in the Budget material have been announced previously. In this news item we highlight the new information.

Income tax

Income tax rates remain unchanged. The taxable bands for 2006/07 have been increased in line with inflation and are:

Starting rate 10%	£0 to £2,150
Basic rate 22% (20% for savings and 10% for dividends)	£21,151 to 33,300
Higher rate 40% (32.5% for dividends)	Over £33,300

Income tax personal allowances for 2006/07 were announced at the PBR. See PN02 for details.

National Insurance contributions

All the National insurance rates and thresholds for 2006/07 were announced at the PBR. See PN02 for details.

Tax credits and child benefit

All the rates and income thresholds for Working Tax Credit and Child Tax Credit were set for 2006/07 at the PBR. See PN02 for details. The following points are noteworthy:

• The child element of CTC (£1,765 for 2006/07) will be uprated at least in line with average earnings up to the end of this Parliament.
• The percentage of childcare costs qualifying for the childcare element of WTC goes up in 2006/07 from 70% to 80%.
• The income disregard goes up from £2,500 to £25,000. The disregard is the amount by which the claimants’ income can increase, compared to the previous year, before their tax credit award is recalculated to reflect the increased income.

Child benefit and guardian's allowance - the 2006/07 were set at the PBR. Rates increase in line with inflation, except for the lone parent element, which is frozen.

Capital gains tax

The CGT annual exemption for individuals in 2006/07 is £8,800. This also applies to personal representatives and trustees of certain settlements for the disabled. For most other trustees it is £4,400.

Inheritance tax

It was announced last year that the inheritance tax threshold will rise to £285,000 in 2006/07 and £300,000 in 2007/08. The threshold has now been set for the two years after that–it will rise to £312,000 in 2008/09 and £325,000 in 2009/10.

Corporation tax

From 1 April 2006, nil rate and non-corporate distribution rate are abolished. Other rates are unchanged; the small companies’ rate is 19% on profits up to £300,000. The main rate is 30%.

Stamp duty land tax

The starting threshold goes up to £125,000 for residential property with effect from 23 March 2006. The threshold of £150,000 in disadvantaged areas, and all other rates and thresholds, remain unchanged.

VAT rates and thresholds

Increased VAT turnover thresholds for registration and deregistration (see Budget Note BN 41)

With effect from 1 April 2006:

• The annual taxable turnover threshold, which determines whether a person must be registered for VAT, will be raised from £60,000 to £61,000.
• The taxable turnover threshold which determines whether a person may apply for deregistration will be increased from £58,000 to £59,000. The existing conditions for determining entitlement or liability to cancellation remain unchanged.
• The registration and deregistration limits for relevant acquisitions from other European Union Member States will also be increased from £60,000 to £61,000.

The increase in the annual taxable turnover threshold means that a person will have to apply for registration if:

• at the end of any month, the value of the taxable supplies made in the past 12 months or less has exceeded £61,000; or
• at any time there are reasonable grounds for believing that the value of the taxable supplies to be made in the next 30 days alone will exceed £61,000.

If at the end of any month, a person's taxable turnover in the past 12 months or less exceeds £61,000 but HM Revenue and Customs is satisfied that it will not exceed £59,000 in the next 12 months, that person will not have to be registered.

VAT: Changes in fuel scale charges

With effect from the start of the first prescribed accounting period beginning on or after 1 May 2006, businesses using cars for business purposes that recover input tax on fuel used for private motoring must use the revised VAT scale charges for taxing the private use of road fuel. Notice 700/64 VAT: Motoring Expenses will be updated.

The revised scale charge and output tax payable in each accounting period can be found in Budget Note BN 39 and the associated chart.

VAT: Reduced rate for contraceptives (see Budget Note BN 40)

A reduced VAT rate of 5% will apply to sales of all contraceptive products-including sales by retailers, vending machines or via the internet-regardless of whether purchased by an individual or organisation such as a sexual health charity or the NHS.

It is expected that the reduced rate will be effective from 1 July 2006. A new Group will be added to Schedule 7A of the VAT Act 1994 by Treasury Order, to introduce the reduced rate.

Contraceptives obtained on the prescription of a medical practitioner are already zero-rated by the Value Added Tax (VAT) Act 1994. Contraceptives that are fitted, injected or implanted by a health professional form part of a VAT exempt supply of medical care. The introduction of this new reduced rate will not, therefore, affect the VAT treatment of contraceptive products supplied in these circumstances. The reduced rate applies to all other contraceptive products including emergency contraception. However, the VAT treatment of fertility monitoring devices or any product used for natural family planning is unaffected.