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September £60 tax windfall for millions of us

More than 20 million people will receive a tax windfall in their pay packets over the next few weeks.
Amidst the current economic doom and gloom Tracy Jenkins, tax director with accountants HWB, explains why HMRC is making the payments which have cost more than £2.5 billion.

“New tax measures came into force this month which will see basic rate taxpayers making a saving of £120 this year,” she says. “£60 less tax will be taken from their September pay packets and then £10 per month less tax will be deducted for the rest of the tax year.

“The windfall is the result of an increase of £600 in personal allowances for basic rate taxpayers which is now set at £6035. This increase has been triggered by Gordon Brown’s u-turn on his controversial abolition of the 10p tax band. In effect the increase is designed to offset the negative impact of the abolition.”

For those with a monthly pay date on or after 7 September, the reduction will be £60 in their tax paid that month. If a September pay date falls before the 7th they will see a £70 reduction in their October tax.

On payslips the changes will be made as alterations to personal allowances and to their tax codes. The self-employed will not see the benefit until January 2009 and higher rate tax payers will not benefit at all!

“The windfall may trigger a much-needed boost to the economy for September although in the current economic climate many may consider it is not enough to make a difference,” Tracy concludes.