While income tax rates, bands and allowances remained largely unchanged in Chancellor Gordon Brown's budget, fresh tax credits for families were announced. Mr Brown said that, thanks to an extra £2.7 billion sterling (€4.39 billion) directed at families from April 2003, couples with children would be better off, even taking the National Insurance rise into account.
From April next year, employers, employees and the self-employed will pay an additional 1 per cent National Insurance contributions on all earnings above £4,615. The increase will add an extra £3.70 per week to the state's take from a full-time worker on £21,700 a year, Mr Brown said.
Mr Brown unveiled a series of measures which, he said, would put families first. A child tax credit will be available to families with combined incomes of up to £58,000, with those earning up to £66,000 given some help for the first year of their child's life.
Families with an overall income of £50,000 or less will gain £1,400 a year in tax credit and child benefit. This sum compared with £575 a year in 1997, Mr Brown said. Families with two children earning up to £35,000 are to get up to £50 a week to help with childcare costs.
"The direct tax burden on a family on average earnings with two children will be below 20 per cent, lower than ... any previous year since 1979," he said.
The UK still operates a tax-free allowance system and the personal income tax allowance now stands at £4,615 for the coming April-to-April tax year. Workers will pay tax at 10 per cent on the next £1,920 of their incomes, at 22 per cent on income between £1,921 and £29,900 and at 40 per cent above that. The basic state pension increased by £3 a week for single people and £4.80 for couples.
