The difference in your pocket

New tax breaks will hand the average household an extra £460 a year, the chancellor promised yesterday, but the surprise losers in a Budget hailed as lifting children out of poverty are low earning single parents and families with one child.

A childless couple who both earn £40,000 a year will gain an extra £764 a year from Mr Brown's largesse, according to figures from accountancy firm PricewaterhouseCoopers. But a single parent with one child struggling by on £10,000 a year will see their income fall by £66.60 in the coming year. A married couple with one earner making £10,000 a year and one child will also see a fall in income next year of £58.80.

Single parents will be hit hard by the loss of the additional tax allowance for children - announced in the last Budget - which gave 10% relief on £1,970. The taxman therefore whips £197 from their income this year.

The children's tax credit will more than make up for the loss, but that does not kick in until 2001-2. Tax experts yesterday expressed surprise that the chancellor had not moved to close the one-year shortfall, which was spotted as a potential problem last year.

For working mothers, a self-proclaimed child-friendly chancellor is only promising jam tomorrow.

Higher earning lone parents, however, will be better off from improvements to personal allowances and the cut in the basic rate of tax to 22p from 23p that comes into force on April 6.

Pensioners reap the benefits of better personal allowances and income tax cuts without the loss of married couple's allowance that hits under 65s.

A lone pensioner on £12,000 a year will be better off by £50 a year, while a married pensioner couple on £15,000 will gain £166 a year.

Add to that already announced increases in the basic pension, the increase in the winter fuel allowance to £150 and higher tax breaks on Isa savings accounts, and pensioners will be able to raise a cheer to the chancellor.

But the biggest winners, even with the loss of the married couple's allowance, are couples who are both in work. The dual income, no kids 'Dinkies' see an annual gain of £414 on a joint income of £40,000, rising to £764 on incomes above £80,000. The benefit comes from the fall in basic rate tax, coupled with increases in personal allowances and the national insurance threshhold.

But their gains will trickle away in "stealth" taxes such as the abolition of mortgage interest relief and the hefty tax bill they face if they move to a £250,000-plus dream home.

Dinkies surfing the London property boom with a house purchase of £300,000 will be hit with a tax bill of £9,000, £1,500 more than last year, or more than enough to wipe out other tax gains. They will also lose Miras, which last year was worth £208.44 a year for the maximum £30,000 qualifying loan.

Tobacco users will see their tax gains go up in smoke.

A packet a day smoker will lose £91.25 over the next 12 months from the 25p per packet increase in tobacco duty announced yesterday.

Case studies

Couple, both employed

Bella and Max live in a fashionable part of west London. Since an accident, Bella has had to work from home. Their plans to sell their Notting Hill flat and move out to the country have taken a hit, with stamp duty on property above £250,000 rising to 3%.

As Bella uses a wheelchair, the couple rely heavily on private transport. While Max is pleased petrol duties have risen only in line with inflation, his estate car will miss out on the extension of the vehicle excise duty reduced rate for cars up to 1,200cc. The offer of 100% tax relief to any small business buying computers, or investing in e-commerce and new information technology might help to persuade Max to realise his dream of launching an online art auction.

The couple, who are diligent savers, will enjoy the increase in next year's Isa limit to £7,000 per person.

Lone pensioner

Michael O'Sullivan lives alone in a small village in Northern Ireland. The increase from £5,720 to £5,790 in the personal allowance for someone aged under 75 will make a small difference to his monthly income, together with the other income tax changes. It can get quite cold in the winter, so the £50 increase to £150 a year in the winter allowance for fuel is an added bonus. The 25p increase in the price of cigarettes has annoyed him, but at least there is no increase in the duty on whisky. Michael spends most of his day watching TV and is looking forward to not having to pay his licence when he turns 75.

Married, one employed, one child

Bill and Alice Harford and their young daughter, who live comfortably on his doctor's salary of £80,000, aren't too disappointed by yesterday's announcements. Their loss of the married couple's allowance and Miras has been offset by basic rate tax reductions. The family may postpone its decision to move house, since they would pay 4% stamp duty on the £500,000 home they had set their hearts on. The rises in petrol duties will cost them more to run their 5 series BMW, though there has been no change in vehicle excise duty.

Otherwise, the Budget has been mostly good news: child benefit is increasing to £15.50 from April 2001, Bill will enjoy a £100 tax cut when he electronically files his return to the inland revenue, and the family will pay less flight duty when they fly to their villa in Tuscany, if they fly economy rather than first class.

Married, two employed, two children

Wendy and Andy live in Middlesex with their twin daughters, Natalie and Nicola. Wendy teaches a dancercise class for tots and works in a children's clothing store. Andy, who is a chef, enjoys a drink after work with his colleagues, will not be too upset by the 1p per pint increase in the tax on beer - though the freezing of duty on spirits may encourage him to mix his drinks.

Wendy's Ford Fiesta which takes her to work each day will earn her a reduced rate of vehicle excise duty. The family are relieved, too, that the chancellor has not increased the tax on insurance policies - their household premiums are already set to rise following a recent claim.

Pensioner couple

Victor and Margaret Meldrew would not believe the chancellor's latest concession to drivers of green cars. Having already splashed out on an eco-friendly city car to earn the reduced rate of VED, Victor now finds that his old Vauxhall Nova would have qualified after all.

With the 10p starting rate of income tax being extended to savings from April 1999, the couple will be able to reclaim some tax and will be heartened by the £150 a year increase in pensioners' winter fuel payments and the VAT cut on energy-saving materials.

They will benefit from the uprating of the pensioners' tax allowance to £5,790 and, looking ahead,will enjoy a £3 per week increase in state pension. Finally, their children can look forward to a bigger inheritance following the increase in IHT threshold to £234,000.

Single, employed person

Andy is a coal miner who lives in south Yorkshire. Like most people, he will benefit from the marginal increase in the personal allowance, the reduction in the base rate of income tax to 22%, and changes in the national insurance banding. He is trying to give up smoking, so the 5% increase in the price of cigarettes may well be a blessing in disguise if he manages to give up. If he doesn't, as a 20-a-day smoker he will definitely feel the increase. Either way, the extra one pence on a pint of beer will make his nights out a touch more expensive. Andy is concerned about the future of his coal mine and, therefore, his job, but is encouraged by the government's plan to create action teams, matching the unemployed in the highest areas of unemployment with suitable vacancies in neighbouring areas.

Single parent, one child

Maddy brings up her baby Jack alone in London after they were abandoned by her partner Alex. The changes in the working family tax credit for children under the age of 11 will result in a slight increase in her weekly income.

The scrapping of the additional allowance for children will cost her £197 in the coming tax year.

The increase from £17.10 per week to £17.55 in child benefit for single parents will only slightly offset this.

Naturally, she will benefit from the slight increase in the personal allowance, as well as the decrease in the basic rate of income tax and the national insurance changes.

As a mother, Maddy hopes the government means what it says about increasing investment in education.

Single, self-employed person

Laurence lives alone in London and teaches bridge. As an enthusiastic beer drinker, the penny on a pint will cause a dent in his wallet over the year - whether this will be offset by the cut in income tax depends on how much he drinks.

Laurence also has a big, old, gas-guzzling car, so the 2p a litre increase in fuel duty might make him cut down on his mileage - although this is unlikely as he uses the car to get to and from work.

He saves £5.50 a week on Class 2 national insurance, but this will be weighed up against an increase of 1% in the Class 4 NI rate. Beyond this, the cut in income tax rate and the slight increase in the personal allowance will make him slightly better off.

• Reports by Ian Wylie and Jessica McCallin