Tax & Accounting News

Personal Allowances Increased For Basic Rate Taxpayers

15/05/2008

The Chancellor of the Exchequer has announced that the personal allowance for individuals aged under 65 will be increased by £600, from £5,435 to £6,035. This measure, clearly undertaken for political reasons following protests after the abolition of the 10% rate, will be backdated to 6 April 2008. Individuals with income subject to PAYE will receive a repayment in September 2008.

The change is only designed to benefit basic rate taxpayers, so the higher-rate threshold is being reduced by £1,200, from £36,000 to £34,800. This means that a higher rate taxpayer’s position will be unchanged.

The amendment will result in some administrative complications, including additional work for payroll departments due to a second PAYE coding change during the year, a delay in receiving final tax return preparation software, and adjustments to any 2008/09 self assessment returns that have already been submitted.

 

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