Just because you are building a new system doesn't mean the old one is at all useless. A lot of the parts can be recycled. If you go for an AMD system(probably a good idea) you can use your ram, the hard drive(s), dvd drive/burner and even the case. Basically you want a new motherboard/processor, 2 more gigs of ram, a video card and a new power supply.
I'm not sure if it's the best/cheapest place to order stuff from over there but I took a look at;
http://www.overclockers.co.uk/
To get a rough idea of the prices you'll be able to get. An Athlon II x4 + a good AM2+ motherboard + 2 gigs DDR2 ram + a 500-600w PSU of a good brand + an HD5770 comes in at around £380. That's probably along the lines of what you should be looking for. If you are willing to go up to £500 that leaves you a bit of money if you'd prefer a Phenom II or would rather replace the case or want a new hard drive ect.