The Chancellor announced that the basic Personal Allowance for the 2008-09 tax year will increase by £600 from £5,435 to £6,035. At the same time the basic rate tax band (the amount of taxable income that can be earned before paying higher rate tax) will reduce from £36,000 to £34,800.
The changes will only benefit basic rate tax payers and will take effect from the first pay day on or after 7th September 2008. The changes will equate to a tax saving of approximately £120 over the course of the tax year.
Many contractors will see their  tax code increase by 60 – that means an extra £600 in allowances announced by the Chancellor. The tax code will then be adjusted and calculated based on HMRC information.
The HMRC website contains lots of information about the new changes.

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