Tax credits to put 'families first'

While income tax rates, bands and allowances remained largely unchanged in Chancellor Gordon Brown's budget, fresh tax credits for families were announced. Mr Brown said that, thanks to an extra £2.7 billion sterling (€4.39 billion) directed at families from April 2003, couples with children would be better off, even taking the National Insurance rise into account.

From April next year, employers, employees and the self-employed will pay an additional 1 per cent National Insurance contributions on all earnings above £4,615. The increase will add an extra £3.70 per week to the state's take from a full-time worker on £21,700 a year, Mr Brown said.

Mr Brown unveiled a series of measures which, he said, would put families first. A child tax credit will be available to families with combined incomes of up to £58,000, with those earning up to £66,000 given some help for the first year of their child's life.

Families with an overall income of £50,000 or less will gain £1,400 a year in tax credit and child benefit. This sum compared with £575 a year in 1997, Mr Brown said. Families with two children earning up to £35,000 are to get up to £50 a week to help with childcare costs.

"The direct tax burden on a family on average earnings with two children will be below 20 per cent, lower than ... any previous year since 1979," he said.

The UK still operates a tax-free allowance system and the personal income tax allowance now stands at £4,615 for the coming April-to-April tax year. Workers will pay tax at 10 per cent on the next £1,920 of their incomes, at 22 per cent on income between £1,921 and £29,900 and at 40 per cent above that. The basic state pension increased by £3 a week for single people and £4.80 for couples.