Income Tax and Personal Savings

Two new credits - child tax credit and working tax credit - replace the children's tax credit and working families' tax credit and disabled person's tax credit from April 2003.

Rates vary, but people on middle-incomes may qualify, especially where they are paying for childcare. To see if you might qualify, visit the Inland Revenue's Tax Credit website at www.taxcredits.inlandrevenue.gov.uk/Home.aspx.

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	Make sure you pay your tax on time, otherwise interest and 5% surcharges may be due.

The Chancellor announced that the earnings cap, by reference to which contributions to occupational, stakeholder and personal pension schemes are limited, is increased for 2003/04 from £97,200 to £99,000. The limitation applies to personal pension contributions by both employers and employees (a point to be "put beyond doubt" by legislation effective from 9 April 2003).

A number of changes have been announced to the rules applying to some minor employee benefits:

• the limit on meals provided to employees on official "cycle to work" days, currently standing at six, is to be removed,
• the value of long service awards which can be made tax free after a minimum of 20 years service is to be increased from the current £20 for each year of service to £50 for each year of service,
• there is currently no tax charge on an annual party if the cost to the employer does not exceed £75 per head. That limit is to be increased to £150,
• gifts (but not cash) worth up to £150 from a third party are currently free of tax. That limit is to be increased to £250.

The date on which these changes will be operative has not yet been announced.

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	Despite recent turmoil in the pensions industry, the basic concept of saving for retirement is still valid and sensible, with tax relief on contributions, pension funds largely tax-exempt, and perhaps the ability to minimise risk by holding funds in cash.

Where employees work at home and the employer contributes to additional household costs, that contribution would be taxable.

With effect from 6 April 2003 a payment at a rate of up to £2 per week can be paid tax free, without any requirement for evidence. A higher rate can be paid, but this will only be free of tax in cases where evidence can be produced to prove the additional costs.

The current rules on the carry forward of trading losses and the reliefs on capital gains on incorporation are perceived to place obstacles in the path of underwriting members of Lloyd's wishing to convert to limited liability status.

It is intended that legislation will be introduced in the 2004 Finance Bill to remove those obstacles.

As announced on 17 April 2002, the 2004 self assessment tax return will include an option for taxpayers who are due tax repayments to nominate a charity to receive all or a specified amount of the repayment. The Inland Revenue will make the donation direct to the charity.

The donor will also be able to claim that the donation is to be made under the Gift Aid rules.