Britain's FTSE boosted by oil stocks and housebuilders after UK budget

* FTSE 100 up 0.6 pct at close

* Osborne announces oil tax changes

* Higher stamp duty rate boosts housebuilders

* Tate & Lyle (LSE: TATE.L - news) , Britvic (Stuttgart: B6S.SG - news) slip on sugar tax (Adds detail, updates prices at close)

By Kit Rees and Alistair Smout

LONDON, March 16 (Reuters) - Britain's top share index rose on Wednesday as oil and gas stocks and housebuilders rallied on the back of proposals in UK finance minister George Osborne's annual budget statement.

Britain's FTSE 100 was up 0.6 percent at 6,175.49 points at its close, outperforming the broader European market.

Osborne cut Britain's economic growth forecast for 2016 and 2017, which sent sterling to a two-week low against the dollar.

"There (are) some big question marks in regards to targets as far as the economy is concerned and being able to turn a surplus," said Alastair McCaig, market analyst at IG (LSE: IGG.L - news) .

Investors, however, were cheered by a reduction of the rate of 'supplementary charge' on oil and gas produced to 10 percent from 20 percent, effectively abolishing petroleum revenue tax.

Britain's oil & gas sector extended its gains, rising 2.8 percent while shares in Royal Dutch Shell (Xetra: R6C1.DE - news) and BP rallied 2.8 percent and 2.4 percent respectively, helped also by a rise in oil prices.

Mid-cap Tullow Oil (LSE: TLW.L - news) jumped 7.9 percent.

Housebuilders also rose, with traders citing government plans to encourage building of new homes on brownfield land, as well as relief that there were no additional taxes or levies announced for the sector, where stamp duty on some properties is already set to rise in April.

Barratt Developments (LSE: BDEV.L - news) , Taylor Wimpey (LSE: TW.L - news) and Persimmon (Other OTC: PSMMY - news) all gained between 2.6 and 3.4 percent.

Investors were also relieved that no new taxes were planned for the UK gambling sector, boosting shares in companies such as Ladbrokes (LSE: LAD.L - news) and William Hill (Other OTC: WIMHF - news) .

Likewise plans to increase the limit on ISA savings accounts gave a boost to personal finance stocks St. James's Place , Hargreaves Lansdown (LSE: HL.L - news) and Brewin Dolphin (LSE: BRW.L - news) .

However, mid-cap company Tate & Lyle, which produces sweeteners, slipped 1 percent and soft drinks companies Britvic and A.G.BARR fell 1.3 percent and 2.4 percent respectively after Osborne said Britain would introduce a new sugar levy on soft drinks.

Nichols (LSE: NICL.L - news) , maker of the soft drink Vimto, slumped 6.6 percent.

The top riser on the FTSE 100 was, however, drugmaker Hikma , which recovered to trade up 5.5 percent after reporting full-year results, with analysts citing a positive broker note.

London Stock Exchange (Other OTC: LDNXF - news) was down 1.2 percent after it said it had reached a merger agreement with Deutsche Boerse (LSE: 0H3T.L - news) which could bring potential savings of 450 million euros ($500 million) a year for the combined company.

Tour operators TUI (LSE: 0NLA.L - news) and mid-cap Thomas Cook (Xetra: A0MR3W - news) dropped 5.4 and 6.5 percent respectively after a downgrade by investment bank Citi. (Reporting by Alistair Smout; Editing by Ruth Pitchford)