Pre-Budget report 2005: Implications

Gordon Brown today issued his pre-Budget report announcing planned changes to tax, housing, and allowances. MyFinances brings you a roundup of the key implications for your money.

Housing

The chancellor focused a good deal of his speech on housing, announcing policies to ensure that the government "meets the housing needs, not just of some, but of all".

To these ends he announced the extension of the government's Homebuy scheme, and took on a number of the recommendations of the Barker review.

"We know that shared equity has an increasing role to play in helping young couples in all our constituencies get on to the first rung of the housing ladder ... I can announce that three of the biggest building societies and banks have joined the government as partners in shared equity; that building companies, including four of the biggest builders, are also now able to offer shared equity purchases; that we are now in discussions with investment companies on their possible involvement; and that we see a future role for housing associations in extending shared equity," Mr Brown said.

Under the government's Homebuy scheme, local authorities will contribute part of the value of a home - with the person buying contributing the rest. For more information on Homebuy, please visit MyFinances Homebuy explanation.

Yorkshire Building Society, Nationwide, and HBoS have signed up to partner the government, Yorkshire said in a statement.

He also announced "long-term reforms in planning, land use, the competitiveness of the construction industry and infrastructure in both the private and social sectors", to bridge the gap between the number of new homes being built and the number of new households being created each year.

Real estate investment trusts (Reits)

As widely anticipated, the chancellor announced that legislation would be published this month allowing real estate investment trusts (Reits) to be set up in the UK.

A Reit is an investment fund that comprises shares in property - either commercial or residential. Investors can buy into the fund, thereby gaining exposure to the property market without needing the capital to buy a property outright.

The introduction of Reits will "widen the number of investors in the residential and commercial property markets" and "increase the funding of new property developments", Mr Brown said today.

Fuel costs

Following a massive increase in the cost of oil in the last two years, the chancellor announced that petrol, diesel, and road fuel gas duty would be frozen for the full financial year - saving motorists some £600 million.

And with domestic gas and electricity prices high and a cold winter predicted - Mr Brown announced a raft of measures to help pensioners stay warm.

"The universal payment tax-free to all pensioner households will be £200 not just this year, but next year, the year after and every single year of this Parliament - and it will be £300 for the over eighties, paid every year before Christmas," he said.

And he added that the government's Warm Front programme would also be offering money to allow pensioners to make sure their homes are adequately insured and heated.

"We will offer all other pensioner households without central heating £300 towards the costs of installing it," Mr Brown added.

He added that energy companies are set to match the government's offer by offering free insulation for all pensioner households on pension credit, and between £125 and £175 towards the costs of insulation for all other pensioner households.

Tax reforms

The chancellor said the "anti-avoidance and fraud measures" would also form part of the 2006 Budget.

These would "address artificial tax arrangements involving capital gains and losses, trusts and offshore companies, rebated oils, and the misuse of Sipps [Self invested pension plans] schemes to purchase second homes".

Tax credits and allowances are set to rise in line with inflation, the Revenue said today.

Inheritance tax changes will seek to close loopholes relating to "avoidance involving second-hand interests in foreign trusts"; and the use of artificial trust arrangements to escape both the inheritance tax "gift with reservation" rules and the "pre-owned assets" income tax charge.