HMRC reminder about changes to basic personal income tax allowance

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 hmrc.gov.uk and clicking the 'Extra Personal Allowance for 2008/09' link.