UK Government Makes Major Tax U-turn
14/05/2008
In what can only be described as a massive U-turn, the chancellor, Alistair Darling, today cut taxes for over 20 million people.
He announced in an emergency mini-budget that the government would raise the personal tax allowance by £600 to £6,035, to be backdated to the 6th April. The personal allowance is the amount of income you can earn without paying any tax at all. Income earned over this personal allowance is subject to income tax.
The move would mean that 600,000 low-income earners will now not pay any tax at all. But it also means that everyone earning up to the higher income tax rate threshold - £40,835 will be better off by £120 by the year-end. 17 million of these basic rate taxpayers were not disadvantaged by the removal of the 10p band.
Taxpayers can expect a lump sum of £60 in their September pay packets, plus a tenner a month until the year-end.
Complaints that the removal of the 10p band was is advantageous to the nation's poorest people were vociferously taken to the government leaders by a sizeable group of backbench Labour MPs.
The result is the very unusual situation of a major budget decision on tax rates being reversed within the same financial year and within only two months.
He announced in an emergency mini-budget that the government would raise the personal tax allowance by £600 to £6,035, to be backdated to the 6th April. The personal allowance is the amount of income you can earn without paying any tax at all. Income earned over this personal allowance is subject to income tax.
The move would mean that 600,000 low-income earners will now not pay any tax at all. But it also means that everyone earning up to the higher income tax rate threshold - £40,835 will be better off by £120 by the year-end. 17 million of these basic rate taxpayers were not disadvantaged by the removal of the 10p band.
Taxpayers can expect a lump sum of £60 in their September pay packets, plus a tenner a month until the year-end.
Complaints that the removal of the 10p band was is advantageous to the nation's poorest people were vociferously taken to the government leaders by a sizeable group of backbench Labour MPs.
The result is the very unusual situation of a major budget decision on tax rates being reversed within the same financial year and within only two months.
