Alistair Darling's March Budget and May 'mini-Budget' has marked a substantial reform of the UK tax system. Some of the changes were announced last year by Gordon Brown, while others were revealed in last October's Pre-Budget Report.

The changes that took effect from April include:
Income tax and national insurance contributions for 2008/09
•  The basic rate of tax was cut to 20%.
•  The starting rate of tax (10%) was controversially abolished, but in its place there are higher personal allowances and a new 10% starting rate for savings income. You are unlikely to benefit from the new 10% savings band unless your earnings/ pension income is not much more than your personal allowance.
•  There was an over 19% increase in age allowances for those aged 65 or more by 5 April 2009 and, eventually, an almost 16% increase in the basic personal allowance. These were both designed to compensate for the loss of the starting rate band. Other allowances generally rose by around 4%. 
•  The upper level of earnings on which you pay full rate national insurance contributions (NICs) has risen from £34,840 to £40,040.
The combined effect of all these changes depends upon your level and mix of income. Overall, there seems to be an element of giving with one hand (basic rate cut) and taking away with the other (starting rate loss and higher NIC threshold).

Foreign dividends
If you receive dividends from an overseas company (not an offshore fund), you will now be treated as also receiving a 10% (non-reclaimable) dividend tax credit. This means that if you are a basic rate taxpayer, you will have no tax to pay, while if you are a higher rate taxpayer, your liability is 25% of the net dividend.

Capital gains tax
Capital gains tax is now a flat rate tax of 18%. The Finance Bill also contains details of the new entrepreneurs' relief, which can cut the tax on the first £1,000,000 of your business gains to 10%. This relief applies to the disposal of a business or part of it, not merely to business assets.

Non-domiciliaries
If your tax domicile is outside the UK, you will now potentially face a UK tax bill on your overseas income and gains. There are some small concessions, but if you have been resident in the UK for the last seven tax years, you could face the choice of paying a £30,000 annual charge or UK tax on your worldwide income.

Business taxation
The rate of corporation tax for small companies rose to 21% on 1 April, while the mainstream rate fell to 28%. There has also been a major overhaul of the capital allowances regime, with a new £50,000 annual investment allowance for plant and machinery gualifying for 100% relief.
Many of these changes could mean that your tax planning needs urgent review. The value of tax reliefs depends on your individual circumstances. The Financial Services Authority does not regulate tax advice.

More Higher Rate Taxpayers
One of the odd results of the Chancellor's mid-May income tax changes was that he increased the number of higher rate taxpayers by 150,000. This was because Mr Darling cut the top of the basic rate band by £1,200 (to £34,800) at the same time as increasing personal allowances by half that amount. In 2008/09 there will be almost four million higher rate taxpayers, over two-thirds more than ten years ago.