Increase in personal tax allowance

The Chancellor, Alistair Darling has announced details of the compensation the government is to offer taxpayers who have been hit by the scrapping of the 10p income tax starting rate.The basic rate personal tax allowance is to rise by £600 to £6,035. As a result basic rate taxpayers will save £120 annually.Higher rate taxpayers will see no difference in the amount of tax they pay as the level at which they enter the higher rate tax band is reduced by £1200 which negates the effect of the increased personal allowance.The increase in the allowance will not come into effect until September 2008, althought it is to be backdated to 6 April 2008 . Thus Employees taxed at basic rate will receive a £60 lump sum tax repyament in September , followed by £10 a month for the rest of the year.