News

The chancellor, Alastair Darling has announced a £600 increase in the previously budgetted 2008/09 personal allowance as a "compensation package" for lower earners affected by the abolition of the 10% band for earned and pension income.  This measure also reduces the higher rate threshold to compensate and so higher rate tax paying earners do not also receive the £120 windfall, which applies for this tax year only.

HMRC corrected the Treasury's original announcement, which would have benefitted higher rate taxpayers and announced instead, "To reduce the higher rate threshold as announced by the Chancellor, the basic rate limit will be reduced by £1,200 from £36,000 to £34,800.  Higher rate taxpayers will see no difference in the amount of tax they pay."