Changes to the Personal Allowance and basic rate tax band

Tax codes have changed for many individuals following the Chancellor's announcement of an increase in the 2008/09 Personal Allowance for individuals under 65.

The basic Personal Allowance has increased by £600 from £5,435 to £6,035.

He also announced a reduction in the basic rate limit (the point at which you pay higher rate tax). The new tax codes and rate bands will be used from the first payday on or after 7 September 2008.

If your tax code ends in "L" it will increase by 60. All other codes are likely to remain the same unless you receive notification from HM Revenue & Customs.

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.

How much your tax reduces will depend on how much you have paid already - and in some cases you might get a repayment as part of your pay.

After this if you pay tax at the basic rate of 20 per cent and you are paid monthly you will pay up to £10 a month less tax and if you are paid weekly you will pay up to £2.30 less tax. (The actual figures will depend on your income.)

If you pay tax at the higher rate of 40 per cent

The changes will only benefit basic rate taxpayers.

For further information please contact Gemma Thomas or Ian Sheekey by email or call 01722 336647.