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Building a fairer society

The Government’s aim is to build a fairer society in which everyone can contribute to and share in rising national prosperity. The Government is committed to tackling child and pensioner poverty, providing support for families with children and ensuring security for all in old age. It is also creating a modern and fair tax system which raises sufficient revenue for public services and ensures that everyone pays their fair share of tax. Budget 2007 announces the next stage in the Government’s reforms to simplify the tax system, to provide help for pensioners, support families and make work pay. The Government will:

• remove the 10 pence starting rate of income tax and cut the basic rate of income tax from 22 pence to 20 pence from April 2008;

• align the tax and national insurance systems, raising both the point up to which people pay a higher rate of national insurance and the point at which people start paying higher rate tax, aligning them together in April 2009;

• further increase the child element of the Child Tax Credit by £150 a year to help families with children, and raise the point below which people receive Working Tax Credits by £1,200 to help make work pay;

• raise the point at which people aged 65 and over start to pay income tax by £1,180 in April 2008, reducing the number of pensioners who pay tax by 580,000. By April 2011, no pensioner aged 75 or over will pay any tax on income under £10,000;

• increase the annual Individual Savings Account investment limit from April 2008 to £7,200, of which £3,600 can be held in cash;

• modernise the tax system through further reforms; and introduce a number of measures to tackle tax fraud and avoidance;

• introduce measures to support the third sector including £80 million in grants for community organisations; and

• freeze spirit duties and increase all other alcohol and tobacco duties, in line with inflation.