Q&A: The new tax exemption
Francesca Lagerberg, national tax director at Smith & Williamson, answers questions on the new CGT exemption for substantial shareholdings.
What are the new tax credits referred to in the Budget?
From April 2003 there will be a reorganisation of the existing tax credits available for those on low incomes. The thresholds for the credits have been set at such a level that even those on higher incomes will be able to obtain some benefit. The two new tax credits will be the child tax credit (CTC) and the working tax credit (WTC). A pensions credit will follow in October 2003. The CTC and the WTC will operate by either reducing people’s tax bills or, if the remuneration and hence the tax bill is low enough, turning a tax liability into a payable credit.
What is the child tax credit?
This replaces the children’s tax credit (which only came into force in April 2001), and the child elements found currently in other benefits.
There are no work requirements for the CTC and it will be paid direct to the main carer in the same way that child benefit is paid. However, universal child benefit will live on.
The credit will normally be available for children up until the age of 16. It will be means tested and available for families with income of up to £58,000. This will be based on a couple’s joint income rather than the income of the highest earner.
What is the working tax credit?
The WTC is aimed at low-income households including those people who have disabilities, thus replacing the working families’ tax cedit and the disabled person’s tax credit. It will be administered through pay packets with the Revenue funding any shortfalls. It will be paid to the adult in work, whether or not they have children, and extra amounts will be paid depending on the hours worked and the applicant’s age.
