What do the tax changes mean for you?
We asked experts at accountancy firm Grant Thornton to explain what the changes will mean for you.
Income tax
The 10% starting rate for income tax band will be abolished and the basic rate of income tax is being cut from 22% to 20%.
The upper earnings limit for 11% national insurance contributions (nics) will increase by £100 a week, so employees will pay 11% nics on all earnings from £105 to £770 a week, up from £100 to £670 currently. This will add £520 a year to the nic bills for those earning more than £40,040 a year.
Low income earners will also be worse off because of these changes: Grant Thornton has calculated that those earning between £5,931 and £15,075 a year will feel the pinch most and could be up to £152.40 a year worse off.
Francesca Lagerberg, head of the national tax office at Grant Thornton said: "Unfortunately for those on lower incomes, the removal of the starting rate of 10% will leave them worse off in the next tax year when you put together the income and NIC changes. This will make them even more reliant on the tax credits system if they are eligible to claim. If not already doing so then those on lower incomes may wish to review their tax credits position to ensure they are claiming what they are entitled to."
The main beneficiaries are those who are earning around £34,500, who will be almost £400 a year better off.
Inheritance tax
The inheritance tax (IHT) nil-rate band will rise from £300,000 to £312,000 from April 6 2008. This means that the first £312,000 of your estate is free from IHT. However, 40% tax is levied on anything above that when you die.
Assets passed from a husband or wife or between civil partners are tax-free, but currently, unless they have made careful plans, this simply delays the tax until the death of the second spouse.
However, the rules are changing: Married couples and those in civil partnerships will be able to transfer any unused allowance from the first death to a spouse or partner, so on the second death, they can now leave up to £624,000 before death duties are incurred. This reform will be back-dated indefinitely, so widows and widowers will be able to use their late partner's allowance as well as their own.
This will be welcomed by millions of ordinary families who faced a potential IHT liability because rising house prices have pushed the value of their assets above the single-person's nil-rate band. Halifax estimates that around 2.4m properties are worth between £300,000 and £624,000.
Capital gains tax
Capital gains tax (CGT) is levied on the profits you make from investments. Individuals have an annual CGT allowance, which is rising from £9,200 to £9,600 for the 2008-2009 tax-year, and gains up to this amount are tax-free. CGT is levied on anything above that.
The Chancellor, Alistair Darling, announced last October that he would sweep away the complex CGT system and replace it with one flat rate of 18%. This takes effect on Sunday.
Currently CGT is levied at your marginal rate of tax - 40% for higher-rate taxpayers and 20% for those in the basic rate band. However, taper relief can reduce the amount of tax you pay.
With non-business assets such as buy-to-let property, second homes and equity investments, the proportion of the gain on which tax is liable reduces after the asset has been owned for three years. This brings the effective rate of tax down to 24% for those in the higher-rate band and 12% for basic rate taxpayers if the asset is sold after 10 years.
Under the new CGT system everyone will pay a flat rate of 18% regardless of how long the asset has been owned. This will benefit higher-rate taxpayers and some in the basic rate band.
However, not everyone will be better off as a result of the reform. Taper relief on business assets, which include shares held through company share schemes, kicks in after two years and the effective tax rate drops to 10% for higher-rate taxpayers while basic rate taxpayers would pay only 5%.
An estimated 270,000 people have joined the employee share scheme offered by the firm they work for and these people will be worse off under the new CGT regime.
Mike Warburton, a senior tax partner at Grant Thornton, said: "These are the unintended losers and the Government should have done something to address this issue. It has encouraged company Sharesave schemes, but now thousands of ordinary employees, not just the highly paid executives, face much higher tax bills."
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