Changes to personal allowance and higher rate tax band confirmed

HMRC has confirmed that changes to the income tax higher rate band and personal allowance will take effect from 7th September 2008, in an attempt to make good the damage done by the 10% tax band abolition in Budget 2008.

Although the changes will take effect from 7th September, these changes are effectively backdated to the start of the 2008/9 tax year.

The 2008/9 personal allowance limit will now be £6,035 - an increase of £810 on the 2007/8 tax year (and £600 more than the Chancellor had initially pencilled in for this tax year).

To ensure that higher rate taxpayers don't benefit from this increase, the higher rate tax band (40%) will now start at £34,800 - just £200 more than the 2007/8 tax year (and £1200 less than originally planned for this tax year).

You can read more about the concession, when it was initially announced, here and read the official HMRC guidance here.