Taxpayers face a mixed outlook after Alistair Darling, the Chancellor of the Exchequer, announced a hotchpotch of measures in his first PreBudget Report. Private investors, couples and buy-to-let investors who pay higher-rate tax stand to gain, while entrepreneurs and nondomicile UK residents could lose out when new rules come into force.

There were few direct beneficiaries. The Chancellor gave a further £25 a year to low-income families who receive child tax credits, on top of the £150 increase announced in March, as well as an additional £5 a week in pension credit to eligible reti-rees from next April. However, tax groups said that many low-income families would not be better off after next year’s income tax overhaul also takes effect.

The Chancellor’s most eagerly awaited measure – the increase in the inheritance tax (IHT) threshold from £300,000 to £600,000 for couples and widowers, as well as a plan to scrap taper relief on capital gains tax (CGT) and fix the rate at 18 per cent, would benefit some but not all taxpayers, accountants said.

The new IHT threshold, which will rise to £700,000 in 2010, will not apply to single people or cohabiting couples not in civil partnerships, but it will be backdated for widowers, regardless of when their spouses died. However, financial advisers accused the Government of selling “no news as good news”, because the use of nil-rate discretionary trusts, which protect assets from IHT, already allow the transfer of a spouse’s £300,000 allowance to the surviving husband or wife on death.

The cut in the top rate of CGT, from 40 per cent to 18 per cent, will be a big boost for buy-to-let investors who are higher-rate taxpayers, but not for basic-rate taxpayers, property experts said. For a higher-rate taxpayer who has had a buy-to-let property for ten years, the CGT will fall from 24 per cent to 18 per cent when they sell. For a basic-rate taxpayer, the rate will rise from 12 per cent to 18 per cent. The majority of private investors, who can currently be charged as much as 40 per cent tax on capital gains, will also benefit from the new 18 per cent rate.

Accountants gave warning that entrepreneurs and owners of small businesses would be hit hard by the new rate of CGT – effectively an 80 per cent rise to the rate of tax they pay on the disposal of assets held for more than two years.

Couples who pass income to each other to reduce tax, a practice used primarily by family businesses, may soon find that this becomes illegal after the Chancellor announced a consultation on “income shifting”.

A £30,000 charge for nondomicile UK residents who live in the country for more than seven years could penalise long-term foreign workers such as doctors and nurses, as well as business expatriates, forcing them to review their residency.

Julie Hutchison, an estate planning specialist at Standard Life Assurance, says: “We live in an increasingly mobile society. The levy could affect decisions people make about their period of residency in the UK.”

CASE STUDY

Teresa Kelly and her husband, Gareth, are among the direct beneficiaries of the increases to family tax credits announced in the PreBudget Report.

Mrs Kelly, a primary school supervisor, and her husband have two children, Victoria, 12, and Charlotte, 10, and together earn less than £25,000 a year.

The Kellys, left, will be £480 better off from April, after Alistair Darling announced that the child element of tax credits will increase by a further £25 per child. Gordon Brown had already announced an increase of £150 per child in his March Budget speech. The Kellys will also benefit from changes to income tax thresholds next year.

Mrs Kelly says: “The tax credits do make a difference to us. And as long as they keep pumping money into schools and education, then I think we are all right.”