The standard income tax rate will be lower in the Republic than in the UK from next month. A single Irish PAYE worker earning £20,000 (€25,400) per year, with no extra tax credits, will have an annual tax bill equivalent to £2,500 in the coming tax year. A British worker in a similar situation earning £20,000 (£16,130 sterling) will pay the equivalent of £2,924 in tax, a difference of £424.

In his budget speech yesterday, Mr Gordon Brown left tax rates unchanged but announced a £1 billion across-the-board cut in income tax, raising the upper limit for the 10 per cent starting rate from the first £1,520 of taxable income to £1,880.

The UK still operates a tax-free allowance system and the personal income tax allowance remains unchanged at £4,385. Workers will pay tax at 10 per cent on the next £1,880 of their income, at 22 per cent from £1,881 to £28,400 and at 40 per cent above that.

Mr Brown introduced a series of initiatives to boost the incomes of families with young children. He announced that maternity pay would rise from £60 a week to £100 by 2003.

The children's tax credit, which replaces the old married couples' allowance, will rise from £8.50 a week to £10. It will be paid to about five million families. There is a new baby tax credit, which will give families an extra £10 during the first year of a child's life.

He announced a £5 a week increase in the working families tax credit for the low-paid which would bring the minimum income for a working family with children to £225 a week or £11,700 a year.