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Changes can take time for an employer to implement. The vast majority of people can expect to see the change and any repayment from their September pay packet although the increase in the personal allowance is for the 2008-09 tax year which started on 6 April 2008.

It was announced that the personal allowance for the 2008-09 tax year will be increased by £600 from £5,435 to £6,035, and the threshold at which someone starts to pay higher rate tax will be reduced by £600.

The point at which customers start to pay higher rate income tax is sometimes called the 'higher rate threshold'.

It is the total of the personal allowance and the basic rate limit. To reduce the higher rate threshold as announced by the Chancellor, the basic rate limit will be reduced by £1,200 from £36,000 to £34,800. Higher rate taxpayers will see no difference in the amount of tax they pay.

Further Information is available on HM Treasury’s website.

• Statement on the rate change by the Chancellor of the Exchequer Opens new window