Tax personal allowances – changes to the allowance could mean a confusing September
A change in tax payer’s personal allowances will come into force in September 2008, but ACCA is warning that it could cause confusion for them and for businesses that need to change tax allowances.
Chas Roy Chowdhury, head of taxation at ACCA, explains: “The personal allowance is the amount of money someone earns before they have to start paying tax – the basic allowance for 2008/09 tax year is £5,435. However, there will be a change in September 2008 when the allowance will be back dated to April 2008 to £6,035. This is called the Extra Personal Allowance and was announced by the Chancellor earlier this year following criticism about removing the 10p rate of tax.”
Chas Roy-Chowdhury says that the arrangements are confusing, but are good news for basic rate tax payers. He says: “The arrangements mean that pay packets will look different in September. HM Revenue & Customs website has a page devoted to the changes, which ACCA urges people and businesses to view. And the changes will only benefit basic rate tax payers, not those paying 40 per cent.”
The changes mean that:
• From the first pay day on or after 7 September 2008, there will be a tax saving of approximately £120 over the course of the tax year.
• This means for those whose pay day in September is on or after 7 September, they will pay up to £60 less tax that month.
• For those who are paid monthly and their pay day is before 7 September, they will pay up to £70 less tax in October. To add to the potential confusion, any tax reduction will depend on how much people have already paid. In some cases, people may even get a repayment included in their pay.
• From September onwards, people who are paid monthly will pay the taxman up to £10 a month less tax; if they are paid weekly, they will hand over to the taxman up to £2.30 less tax.
• The basic rate tax band will reduce from £36,000 to £34,800. Anything above that amount will then fall into the 40 per cent tax band.
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Notes to Editors
1. ACCA is the global body for professional accountants. We aim to offer business-relevant, first-choice qualifications to people of application, ability and ambition around the world who seek a rewarding career in accountancy, finance and management. We have 325,606 students and 122,426 members in 170 countries worldwide.
2. ACCA believes that globalisation of business requires one set of reporting standards. We favour principles-based, not rules-based standards, which is why we support the worldwide implementation of IFRS.
3. ACCA believes that tax systems should be transparent, simplified, fair and certain.
4. Complying with regulations affects SMEs disproportionately, which is why ACCA urges governments and standard setters to ‘think small first'’
For further information please contact:
For further information, please contact: Chas Roy-Chowdhury, ACCA Head of Taxation phone: +44 (0)20 7059 5976 / + 44(0)7710 707 516 e mail: chas.roy-chowdury@accaglobal.com
Helen Thompson, ACCA Newsroom phone: +44 (0)20 7059 5759 / + 44 (0)7725 498 654 e mail: helen.thompson@accaglobal.com