Chancellor Alistair Darling is explaining to MPs how he plans to compensate those people effected by the scrapping of the 10p tax band.
Chancellor Alistair Darling has put up the personal tax allowance by £600 - meaning every basic rate taxpayer will pay £120 less tax this year.
He will be hoping the scheme will be enough to see off a potential rebellion by Labour MPs, angry that the move will hit 5.3m of the lowest paid workers.
Mr Darling, who said the package would cost £2.7bn, also said the higher rate threshold would change so that higher earners' tax bills would be unchanged.
Sources say the proposals will be "costly", but are "significant" and will "fix the political problem".
The Commons announcement came as part of Mr Darling's package to help those hit by the axing of the 10p tax rate.
The full details of the package will be in the pre-Budget report in the autumn.
He said the tax allowance changes would take immediate effect.
Labour whips have been encouraging their MPs to listen to the plans, believing it will be enough to prevent a revolt.
'Under pressure'
The scrapping of the 10p tax rate sparked anger among Labour backbenchers, with many fearful of its impact on next week's Crewe & Nantwich by-election.
Mr Darling has already insisted he would "do more" in next year's Budget to help those who have lost out, but he has been under increasing pressure to act now.
Ex-welfare minister Frank Field and a number of Labour MPs have threatened to vote down this year's Budget and the tax change was blamed for a terrible set of local election results.
The scrapping of the lowest rate of income tax was announced last year but came into effect last month, alongside a reduction in the basic rate of income tax from 22p to 20p and increases in child benefit and tax credits.
'Bizarre'
But it emerged that pensioners aged 60 to 64 and low earners without children were losing out as they had to pay 20p tax on that element of that bit of their pay on which they previously paid 10p tax.
There has been outspoken criticism of the PM over the tax move, with Mr Brown admitting that mistakes had been made.
Tory leader David Cameron, who says the 10p tax row will be a key part of their Crewe and Nantwich by-election campaign, said Labour was "beginning to resemble a sort of bizarre soap opera".
Lib Dem leader Nick Clegg said: "I don't want to intrude into the internal grief of the Labour party: Labour figures seem to be doing a good enough job tearing strips off each other for anyone else to contribute."
