Understanding the changes to the Personal Allowance and basic rate tax band in September 2008

The Chancellor announced that the basic Personal Allowance for the 2008-09 tax year will increase by £600 from £5,435 to £6,035. At the same time the basic rate tax band (the amount of taxable income you can earn before paying higher rate tax) will reduce from £36,000 to £34,800.

How the changes will affect your pay and tax
If you pay tax at the basic rate of 20 per cent the changes take effect from the first pay day on or after 7 September and equate to a tax saving of approximately £120 over the course of the tax year. If your September pay day is on or after 7 September, you will pay up to £60 less tax that month. If you’re paid monthly and your September pay day is before 7 September, you will pay up to £70 less tax in October. How much your tax reduces will depend on how much you’ve paid already – and in some cases you might get a repayment as part of your pay.

After this if you’re paid monthly you will pay up to £10 a month less tax and if you’re paid weekly you will pay up to £2.30 less tax. (The actual figures will depend on your income.)

How the changes will affect your tax code
Your employer or pension provider will adjust your tax code based on the information that we send them.

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