Budget 2007... Your questions answered

Q: What are the new road tax rates for 2007/08?

A: There are seven bands of road tax and the cost varies depending on the emission of carbon dioxide per kilometre. To find out the emissions of your car, you will need to contact the manufacturer.

Band A: Less than 100g carbon per kilometre: Zero
Band B: 101g to 200g carbon per kilometre: £35
Band C: 121g to 150g carbon per kilometre: £115
Band D: 151g to 165g carbon per kilometre: £140
Band E: 166g to 185g carbon per kilometre: £165
Band F: 186g to 225g carbon per kilometre: £205
Band G: More than 225g carbon per kilometre: £300*
* Applies only to cars registered after March 23, 2006

Q: What difference could the announced changes make to EIS (Enterprise Investment Scheme) and VCT (Venture Capital Trust) schemes?

A: The changes announced apply to the companies you can invest in and relate to the permitted level of funds that can be raised and the number of employees that a company can have.

The amount that can be raised by a company is limited to £2m in a year and the limit on the number of employees is 50. For VCT investments, the rules became effective from 6 April 2007; for EIS investments, the rules will be effective for shares issued after the Finance Bill receives royal assent, usually around July.

Q: My wife and I are both pensioners under the age of 75. How could the withdrawal of the 10 per cent tax band and the introduction of the new band affect our income?

A: The partial withdrawal of the 10 per cent tax band will become effective from 6 April 2008. The 10 per cent band will remain available for savings income and capital gains. From the same date, the basic rate of tax on non-savings income will be reduced from 22 per cent to 20 per cent. The Government has announced that the higher personal allowances for people over 65 will be increased by £1,180 over inflation for tax year 2008/09, but we do not yet know what the inflation increase will be.

For pensioners on modest incomes, the increased personal allowance and the reduction of the basic rate will effectively offset the abolition of the 10 per cent rate on pension income.

Q: With the changes in the child tax credit, what is the top annual earnings at which the credit is not worth claiming?

A: Child benefit for the eldest child will rise 15 per cent by 2010, from £17.45 to £20. For 2007/08, it will increase by 65p to £18.10. The lone parent rate of £17.55 for the eldest or only child will be abolished. From April 2007, benefit payments for the poorest children increased to £64 a week.

The child element of the Child Tax Credit increased by £150 a year. The second income threshold remains at £50,000.

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This article is for your general information and use only and is not intended to address your particular requirements. Although endeavours have been made to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No individual or company should act upon such information without appropriate professional advice after a thorough examination of their particular situation. Budget 2007 is subject to the Finance Bill becoming law. Levels and bases of, and reliefs from, taxation are subject to change.

Article date: 03.07