14 May 2008
Further changes to tax system
The Government has announced further changes to the tax system to compensate those who lost out the most from the removal of the 10% tax band.
By increasing the personal tax-free allowance from £5,435 to £6,035 most tax payers will receive a £120 rebate this year. The changes will come into effect in September and will be back-dated to the start of the tax year (this April). This will result in a £60 lump sum in September’s pay packet, followed by a £10 monthly increase until the end of the year.
Not everyone will be fully compensated, since those on the lowest incomes lost as much as £230 per year from the abolition of the 10% tax band and yet will only gain £120 from the introduction of the new higher allowances.
Those who will benefit the most from these further changes are those earning between £13,335 and around £40,000. They will gain once from the reduction in the basic rate from 22% to 20% and win again from the extra £120.