New tax measures come into force this month that should see about 22 million people receive a rebate of around £60.
New tax measures come into force this month that should see about 22 million people receive a rebate of around £60.
It all stems from the U-turn by the chancellor on plans to scrap the lowest 10 pence tax band, following pressure from backbench MPs to ease its impact.
It all stems from the U-turn by the chancellor on plans to scrap the lowest 10 pence tax band, following pressure from backbench MPs to ease its impact.
The new measures will mean basic rate taxpayers see a tax saving of £120.
The new measures will mean basic rate taxpayers see a tax saving of £120.
Firstly they will receive a lump sum of £60 in their September pay packet. Their net pay will then rise by £10 per month for the rest of this tax year.
Firstly they will receive a lump sum of £60 in their September pay packet. Their net pay will then rise by £10 per month for the rest of this tax year.
The effective cash-back comes because personal allowances for basic rate taxpayers go up by £600 to £6,035 from 7 September.
The effective cash-back comes because personal allowances for basic rate taxpayers go up by £600 to £6,035 from 7 September.
Self-employed taxpayers will not feel the benefit until they start paying tax from January 2009.
Self-employed taxpayers will not feel the benefit until they start paying tax from January 2009.
Good news?
Good news?
Critics of Chancellor Alistair Darling's U-turn say that these tax rebates will also benefit middle-income taxpayers as much as those on smaller incomes.
Critics of Chancellor Alistair Darling's U-turn say that these tax rebates will also benefit middle-income taxpayers as much as those on smaller incomes.
Taxpayers with another £60 in their pocket may well go out and spend it. Chris JonesTax advisers Lexis Nexis
Taxpayers with another £60 in their pocket may well go out and spend it. Chris JonesTax advisers Lexis Nexis
It will also punch an estimated £2.7bn hole in the national finances as Britain faces a deep economic downturn.
It will also punch an estimated £2.7bn hole in the national finances as Britain faces a deep economic downturn.
"When the chancellor put this budget together he wasn't expecting to lose £2.7bn, but I'm sure when he re-jigged his numbers, he will take account of this extra money," said Chris Jones of tax advisers Lexis Nexis.
"When the chancellor put this budget together he wasn't expecting to lose £2.7bn, but I'm sure when he re-jigged his numbers, he will take account of this extra money," said Chris Jones of tax advisers Lexis Nexis.
"However, what we need to bear in mind, it could be good news for the economy.
"However, what we need to bear in mind, it could be good news for the economy.
"Taxpayers with another £60 in their pocket may well go out and spend it. That could increase High Street profits.
"Taxpayers with another £60 in their pocket may well go out and spend it. That could increase High Street profits.
"So it could in some way balance it [the cost of the rebate] out, but probably not to the full amount."
"So it could in some way balance it [the cost of the rebate] out, but probably not to the full amount."
The 10p tax band was scrapped by Gordon Brown in his final budget as chancellor before becoming prime minister last year, at the same time as he cut the standard rate of income tax from 22% to 20% from April this year.
The 10p tax band was scrapped by Gordon Brown in his final budget as chancellor before becoming prime minister last year, at the same time as he cut the standard rate of income tax from 22% to 20% from April this year.
It is not known whether the Mr Darling will make any changes to personal tax allowances next year in his Pre-Budget Report this autumn.
It is not known whether the Mr Darling will make any changes to personal tax allowances next year in his Pre-Budget Report this autumn.
What will you do with your £60?
What will you do with your £60?
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