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HMRC reminder about changes to basic personal income tax allowance

HMRC reminder about changes to basic personal income tax allowance

HM REVENUE AND CUSTOMS News Release issued by COI News Distribution Service. 2 September 2008

HM Revenue & Customs (HMRC) has issued a reminder about this month's change to the 2008/09 basic personal income tax allowance.

The change, announced by the Chancellor in May 2008, will mean most people under 65 who pay tax at the basic rate will see an extra £60 in their first pay packet on or after 7 September, and a £10 increase in their take-home pay each month after that until next April. Those paid weekly will get £53 the first time the increased allowance is used, and then receive £2.30 extra a week until April. The exact increases depend on how much tax they have already paid in 2008/09.

For most people the change is straightforward; their employer or pension provider will make all the necessary changes to their tax code. They will not have to do anything and don't need to contact HMRC.

For other groups, the following applies:

* Anyone who only pays tax through Self Assessment, such as the self-employed, will have the new allowance taken into account in their tax calculation for 2008/09;

* Individuals where HMRC does not have full information on their tax affairs will get a weekly or monthly increase from September and will get the benefit of the backdated increase once they are taxed on a normal basis or when their tax liability for 2008/09 is finally calculated after April 2009.

* Higher rate taxpayers will continue to pay the same amount of tax

* Budget 2007 significantly increased the personal allowance for those aged over 65. Therefore most individuals aged 65 are unaffected by this change. However, those individuals over 65 who did not get the full Personal Age Allowance because of the level of their income will get the benefit of the revised Personal Allowance.

Further details of how the changes affect people are available by visiting the HMRC website at and clicking the 'Extra Personal Allowance for 2008/09' link.

Notes to editors

1. Around 40 million tax code numbers for those individuals under the age of 65 will change in September. This follows the increase in the basic Personal Allowance for 2008/09 by £600 to £6,035. This was announced by the Chancellor in May and included in this year's Finance Act. The Chancellor also announced that the increased allowance should only go to individuals who pay all their tax at basic rate. So, to make sure that this happens, the basic rate limit for 2008/09 has been reduced by £1,200 to £34,800. This will have the effect of leaving existing higher rate taxpayers paying the same amount of tax as they were before the changes.

2. The new tax codes must be applied by employers on the first pay day on or after 7 September 2008. The majority of the codes will be changed automatically by employers who will only get a small number of individual notifications of changed codes and most people will not get a revised notice of coding (P2).

Issued by HM Revenue & Customs Press Office

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