Chancellor increases personal tax allowance

On Tuesday 13 May the Chancellor of the Exchequer, Alistair Darling, announced changes to the personal tax system to help low-income individuals affected by the withdrawal of the 10 pence starting rate of income tax.

The Chancellor announced that the personal allowance for the 2008-09 tax year will be increased by £600 from £5,435 to £6,035, and the threshold at which someone starts to pay higher rate tax will be reduced by £600 by reducing the basic rate limit from £36,000 to £34,800. This will mean that 22 million people on low and middle incomes will pay £120 less income tax for 2008-09, and around 600 thousand people on low incomes will be taken out of income tax altogether. Higher rate taxpayers will see no difference in the amount of tax they pay.

These changes are not currently reflected in the information published for 2008-09 in tables 1.4 and 2.1 to 2.7. These tables will be updated to reflect the Chancellor’s announcement by the end June.