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Monday 18 August 2008

HMRC increased the annual personal allowance for earnings before they are subject to income tax at 20%. This was by means of compensation for the abolition of the 10p tax rate.

The changes will come into effect on 7 September 2008, but will be backdated to 6 April 2008. The personal allowance increases by £600 to £6035, which equates to a tax saving of £120 over the course of the tax year. The basic rate band has been reduced by £1200 to £34,800.

Andy McQuillan, Tax Partner at Dains comments: “Employees with a monthly pay date on or after 7 September will see a £60 reduction in their tax paid that month. If a September pay date falls before the 7th they will see a £70 reduction in their October tax. After this, monthly-paid employees will see up to £10 less tax deducted from them, with weekly paid employees noticing a £2.30 difference.”

For more information contact Andy McQuillan at Dains on 0845 555 8844

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