Provisions widen gap in take-home pay

THE British budget has further widened the gap between the take-home pay of British and Irish workers on the same gross salary. Despite some moves towards lowering the tax burden here, we still pay a standard income tax rate of 27 per cent, compared to the lowest rate in Britain of 20 per cent. The standard British rate was lowered further yesterday to 23 per cent, a cut of one percentage point.

However, a key difference between the Irish and British systems is that employees in Ireland move on to the higher 48 per cent rate at much lower incomes than in Britain. This means major differentials in take-home pay, particularly for single workers.

The Chancellor of the Exchequer, Mr Kenneth Clarke, also widened the tax bands yesterday and increased the thresholds where British families begin to pay standard and higher rate tax, further increasing the differences between the two tax systems.

A married worker here on £30,000 will pay almost £4,000 more than in Britain. A single worker on £20,000 earns almost £3,500 more in Britain. However, these figures do not take into account the generally higher rate of local taxation in Britain.

As well as cutting the standard rate, Mr Clarke announced a £200 widening of the earnings at which the 20 per cent lower rate of income tax is paid, and added a £280 rise in personal allowances - a move lifting untaxed earnings from £3,765 to £4,045. However, the married couple's allowance was only increased by £40 - which only adds up to a tax saving of £6 a year for couples.

The Inland Revenue said:

(1) on average, taxpayers will be £150 a year (£2.88 a week) better off;

(2) a couple with one earner on average earnings (judged to be £21,388) will be around £214 a year (£4.11 a week) better off;

(3) the real increase in personal allowances means around 410,000 people will come out of income tax altogether.

More than a million small businesses will also reap the benefits of the budget, the government said yesterday. The rates bills on 340,000 small properties in England will be frozen at this year's levels instead of being allowed to rise by the rate of inflation.

The measures will also help another 745,000 small businesses currently subject to the existing transitional arrangements which would have seen a rise in their rate bills of up to 9.5 per cent.

A further 60,000 business properties which are already seeing their rates reduced will see cash reductions of up to 20 per cent.

In a separate measure, about 400,000 companies - some 90 per cent of companies paying tax - will gain from a cut in the small firms' corporation tax.