Following his U-turn on Capital Gains Tax changes Alistair Darling has today performed another change by announcing a significant change to the tax bands to compensate those who have lost out after the removal of the 10% rate band. Bevan Osgood of Dodd & Co explains how it should work.
In order to compensate those who have lost he will raise the personal allowance for people under 65 of years to £6,035. He will also alter the threshold for the high rate tax band in order that high rate taxpayers do not benefit.
The impact of this will be that basic rate taxpayers will benefit by £120 per year, which should appear in pay packets from September. For those that earn less than £18,000 this will compensate most of their loss, but those earning over this and not high rate taxpayers the extra money will be in addition to the benefits already felt by the reduction of the basic rate band to 20%.
High rate taxpayers and those over 65 will not benefit from this change that is expected to cost the Treasury £2.7 billion. |
