Personal And Trust Taxation
The starting and basic rate limits and main allowances will be increased in line with statutory indexation and there will be no changes to the income tax rates. The family element and baby addition of CTC remain at £545 for yet another year, but the maximum childcare voucher has been increased to £55 per week. Most of these changes were announced in the 2005 Pre-Budget Report. The maximum earnings for which pension provision may be made with tax relief (the ‘earnings cap’) has been replaced by the new simplified pensions tax regime.
Venture capital schemes
For investments in venture capital trusts (VCTs) made after 5 April 2006, the rate of relief will be reduced to 30% and the minimum qualifying holding period will increase from three years to five years. From the same date, the annual investment limit for income tax relief for enterprise investment schemes (EIS) will double to £400,000. From 6 April 2007, money held by a VCT will be treated as an investment in qualifying holdings.
The limit to the maximum size of companies able to raise money under the VCT, EIS and corporate venturing scheme (CVS) is reduced to £7m before investment and £8m afterwards. This will not apply to funds raised before 6 April 2006 for VCTs or for subscriptions to EIS or CVS shares made before 22 March 2006.
Qualifying life policies
From 7 October 2005, variations in the method for calculating the investment returns allocated by life insurers will be disregarded for the purposes of testing whether a life assurance policy remains qualifying. The revised treatment will also apply retrospectively to similar variations that occurred under court-approved insurance business transfer schemes. Taxation of trusts From 6 April 2006, there will be a package of changes to the tax treatment of trusts. These will provide common definitions for income tax and capital gains tax, as well as increasing the standard rate band to £1,000. A parent will be regarded as having an interest in a settlement for capital gains tax purposes (as well as income tax) if their dependent minor child is a beneficiary.
From 6 April 2007, the test for trustee residence will be the same for both income tax and capital gains tax.
Child trust fund
The Government will pay £250 (£500 for lower-income families) into each child trust fund account when the child reaches the age of seven. This will be in addition to the payment at birth.
