Tax rebate for 22 million people
Around 22 million workers are set to receive an extra £60 in their pay packets for September, as new tax measures come into force this month.
The tax rebate is a result of the government’s u-turn over the decision to scrap the 10p tax band in the 2007 Budget. Back in May, the chancellor Alistair Darling confirmed that basic rate taxpayers would see their personal allowances increase by £600 during the 2008/09 tax year in order to compensate those hit by the 10p tax abolition.
The government estimated that around 22 million people would benefit from an additional £120 a year as a result of the rebate.
The change means millions of basic rate taxpayers will receive an additional £60 in their September pay packet, with a £10 increase in their take-home pay each month after until April 2009.
The majority of people expecting the rebate do not have to take any action to receive; their employer or pension provider will make all the necessary changes to their tax code. However, if you are self-employed or for any other reason pay tax through self-assessment then you will have to take the new allowance into account when you do your tax calculation for 2008/09.
Those aged over 65 are unlikely to see any change, as their personal allowances were already increased in the Budget 2007. And, of course, higher rate taxpayers will not see any difference in their pay packets and will continue to pay the same amount of income tax.
Used by an employer or pension provider to calculate the amount of tax to deduct from pay or pension. A tax code is usually made up of several numbers followed by a letter. If you replace the letter in your tax code with ‘9’ you will get the total amount of income you can earn in a year before paying tax, for example 747L would mean a person could earn up to £7,479 before paying tax. The wrong tax code could mean a person ends up paying too much or too little tax.