The Chancellor has announced that everyone's tax-free Personal Allowance for 2008/09 (i.e. this tax year) will rise 600 to 6,035. This will fully or partly reimburse those who lost out when the 10p tax-rate was scrapped; and give a tax cut to many others.

For all basic-rate taxpayers who earn above 6,035 the impact is a 120 gain and it will be backdated to the 6 April, start of the tax year. This money will go straight into people's pay, with 60 extra coming in September, and an increase of 10 per month for the rest of the financial year until next April.

Will this make up for the end of the 10% band?

If you are a basic-rate taxpayer earning 6,035 or more, you'll pocket 120 more over the year than you would have done before this announcement. This will make up what you lost when the 10% band disappeared, unless you earn between 7,130 and 9,075, when you could still be up to 30 out of pocket compared to last year (though the Govt says many will have had tax credit rises too).

Higher Rate Taxpayers won't gain (or lose)

For higher-rate taxpayers, the 40% threshold will shift down by 600 to 40,835, meaning most will earn exactly the same as they would have done (if you earn between 40,835 and 41,460, you make a small profit).

See the Chancellor's full statement

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