Personal Tax Allowance increase due

The UK's current Chancellor, Alistair Darling has revealed to the nation that the Personal Tax Allowance (PTA) for everyone is to be raised this year.

What does this mean?

It means that every taxpayer will have an increased basic rate, the amount of money you won't be charged tax on until the threshold is reached. It is set to be increased by £600 per person and be backdated to April 6 2008, the start of the new tax year. Currently at £5,435 it will raise to £6,035.

Why has this happened?

When Gordon Brown was Chancellor under Tony Blair's leadership, the 10p tax band was due to be scrapped. In reality this meant that many people - especially those on middle to low incomes - would be much worse off than before. This led to a bit of an uproar, and maybe as a result of poor election results or fears of more bad publicity, the government has opted for an emergency change in everyone's PTA.

What difference will it make?

It will benefit plenty of people, particular those that were due to lose out over the 10p tax band kerfuffle.

• All taxpayers will get a backdated rise in their PTA to £6,035 so their finances will be £120 better off.
• Minimise the losses of those with low to middle incomes when the 10p tax band goes. 4.2 million people will benefit and the losses of the remaining 1.1 million will be halved.
• No high earning taxpayers will be affected by the move.

The money needed in order to finance the move will be borrowed but will not come out of the economy during present conditions. Despite costing £2.7 billion to enforce, it has been declared as 'the fairest and most effective way' to make up for any losses.