Personal Allowance Increase:
As a result of the negative response to the Chancellor’s withdrawal of the 10p starting rate for the 2008/09 tax year, there has recently been a further announcement of an increase in the 2008/09 personal allowance by £600, from £5,435 to £6,035.
The Chancellor believes that this increase in the personal allowance should compensate the people that would have lost out due to the removal of the 10p tax rate.
Anyone falling into the basic rate band should be £120 better off due to this change. This is expected to be dealt with by paying individuals a lump sum in their September pay packet of £60 and then a £10 monthly increase until the end of the tax year, although this has not been officially confirmed.
This will not benefit taxpayers chargeable to tax at the 40p rate, as the level at which the higher rate is applied will also be reduced by £600.
This £600 increase in personal allowance does not apply to Age related personal allowances which remain at the same rate as in the initial budget - £9,030 for individuals aged 65 -74, and £9,180 for individuals aged 75 or over.
As this relates to the tax year ending 5th April 2009, it will NOT affect TaxCalc 2008, although this change will of course be incorporated into our 2009 program.
