Yesterday, the Chancellor of the Exchequer, Alistair Darling, announced changes to the 2008 Budget Proposals.

The Chancellor announced that the personal allowance for the current tax year 2008-09 will be increased by £600 from £5,435 to £6,035. This increase will be effective from 6th April 2008.

Tax codes will be adjusted in time for your September salary payment resulting in a cumulative tax saving to date of £60 plus £10 per month thereafter.

The Chancellor also announced that the “Basic Rate Tax Band” will be reduced by £1,200 from £36,000 to £34,800 resulting in an increase in the number of taxpayers who will now pay tax at the higher rate of 40% on earnings, savings income etc and 22.5% on dividend income.

The original and updated bands are shown below:

	Original	Updated
Personal allowance	£ 5,435	£ 6,035
Basic rate band	£36,000	£34,800
Higher rate threshold	£41,435	£40,835

However, clients with earnings/ pensions in excess of £40,835 will see no difference in the amount of tax they pay.

Please ensure that you take these updated figures into account when declaring dividends and reviewing your higher rate tax position for 2008/09.

If you have any queries, please do not hesitate to contact a member of our tax department on 0141-225-6400.