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10 September 2008 Millions to benefit from tax rebate

More than 22 million taxpayers will receive an extra £60 in their pay packet this month, as changes to personal income tax come into force.

The rebate stems from the Chancellor’s decision to increase the personal income tax allowance by £600 to compensate those who lost out as a result of the withdrawal of the 10p tax band.

Consequently, basic rate taxpayers will see a total tax saving of £120, with their net pay set to rise by £10 per month for the remainder of the 2008/09 tax year.

Self employed individuals will not benefit from the revised allowance until they start paying tax next year.

‘For most people the change is straightforward; their employer or pension provider will make all the necessary changes to their tax code,’ said HMRC.

Meanwhile, higher rate taxpayers will not gain from the change as the level at which they start to pay 40% tax has been reduced from £36,000 to £34,800.

Critics claim the rebate, which will cost the Treasury an estimated £2.7 billion, will make it more difficult for the economy to weather a possible recession.

If you would like to know more about how the new rates could affect you, please contact us.