TaxPersonal TaxQ&A: The new tax exemption

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.

Related Articles

LITRG urges government to consider tax changes in disability work plan

Administration LITRG urges government to consider tax changes in disability work plan

23h Lucy Skoulding, Reporter
HMRC appeal rejected in Tottenham Hotspur case

Administration HMRC appeal rejected in Tottenham Hotspur case

2w Emma Smith, Managing Editor
HMRC urged to clarify impact of income allowances on Self-Assessments

Personal Tax HMRC urged to clarify impact of income allowances on Self-Assessments

2m Alia Shoaib, Reporter
New trading allowance: simplicity, but not as we know it

Administration New trading allowance: simplicity, but not as we know it

2m Emma Rawson, ATT Technical Officer
Wealthy individuals could circumvent top tax rate rises

Personal Tax Wealthy individuals could circumvent top tax rate rises

4m Alia Shoaib, Reporter
Italy grants first successful non-dom status application to former UK non-dom

Personal Tax Italy grants first successful non-dom status application to former UK non-dom

4m Emma Smith, Managing Editor
Industry reaction: Taylor Review does not go far enough in addressing tax issues

Legal Industry reaction: Taylor Review does not go far enough in addressing tax issues

5m Alia Shoaib, Reporter
Does the Taylor Review sufficiently address the gig economy?

Corporate Tax Does the Taylor Review sufficiently address the gig economy?

5m Alia Shoaib, Reporter