It became obvious that there would be around 5 million losers if earnings were taxed at 20% basic rate and not the old 10% rate, unfortunately most of them being the lowest earners in the country.

So the new Chancellor Alistair Darling has announced....

• an increase in the personal allowance of £600, from £5,435 to £6,035; and
• a reduction in the basic rate limit of £1,200, from £36,000 to £34,800.

These changes mean that basic rate taxpayers will benefit by £120 per tax year whilst the position of higher rate taxpayers will be unchanged.

Provisional announcements indicate that the changes will not take effect for employees until September.