The Chancellor rejected income tax cuts in favour of £1 billion in targeted help for families.
The personal income tax allowance will rise in line with inflation, but no further next month, from £4,745 up to £4,895.
Using the £1 billion, Mr Brown told MPs, he could have raised that further, cutting people's tax bills.
However, that would have handed just 80p a week, or £40 a year, to an average family with annual earnings of £23,400.
Directing the cash into the child tax-credit instead would give the same family £5 a week, or £260 a year.
"So the best way to do most to help low and middle-income families is not through a further rise in personal tax allowances, but through tax credits which offer the best family tax cut," he told the Commons.
The child tax-credit will rise by 13 per cent over the next three years in line with earnings. Including child benefit, that will mean up to £63 a week for the first child and £111 for two children.
As a result, the point at which families start contributing more to the Treasury (excluding National Insurance) than they receive has risen from £15,000 in 1997 to £21,200.
From April, that will rise again to £22,000, with tax credits effectively wiping out income tax liability until earnings of £430 a week.
"Because of rising child tax credits, a total of three million of Britain's seven million families with children will now receive more in tax credits and child benefit than they pay in income tax," Mr Brown pointed out.
"Again, a family tax cut that does most to help low and middle-income Britain.
"And, with child benefit up from £11 in 1997 to £17 this April, every family in Britain is better off."
Nicola Simpson, chief executive of the charity One Parent Families, said: "It is good to have the commitment to increasing Child Tax Credit in line with earnings, which will protect the poorest children from falling behind and help bring poverty rates down.
"Further Child Tax Credit increases will be essential in future years if the Government is to achieve its ambition of halving child poverty by
Ms Simpson also welcomed Mr Brown's announcement yesterday that he would consult on an additional state payment into Child Trust Funds at secondary school age, as well as extra money announced for Sure Start and the Parenting Fund.
CTF accounts come into operation next month, with a £250 payment from the state to each child born after September 1 2002 and double that for those from low-income families.
The Government is already considering a second payment at age seven.
Today's Budget announced an extra £25 million in the next two years for earlylearning partnerships with parents through the network of Sure Start centres and other pre-school providers.
And an extra £10 million was allocated in 2006-07 and 2007-08 for the Parenting Fund to support parenting programmes in the voluntary and community sectors.
George McNamara, of children's charity NCH, said: " Today's Budget is good news for teenagers and families with young children, particularly those on low incomes.
"Increasing Child Benefit and tax credits will give a significant boost to families who are struggling to make ends meet.
"But, if the Government is to meet its target of halving child poverty by 2010, it needs to channel many more resources into helping lone parents and ethnic minorities get back into work."
Save the Children said that the Chancellor's targeting of help at "hard-working families" meant that Britain's one-million poorest children will miss out.
Tax credits largely benefit only those in work, and more help needs to be given to children of unpaid carers, the ill, disabled people and others without jobs, said director general Mike Aaronson.
"We are disappointed that, yet again, the Chancellor has chosen to ignore Britain's million poorest children, those most in need of his help," he said.
"Although the Chancellor has achieved the Labour Government's first target of reducing child poverty by a quarter by 2005, without action to address the needs of Britain's poorest children, neither the target of halving child poverty by 2010, or eradicating it in a generation will be met."