Chancellor Alistair Darling has put up the personal tax allowance by £600 to compensate people who lost out from the scrapping of the 10p rate.
Q Who was affected by the abolition of the 10p tax band?
A An estimated five million people - 20% of taxpayers - particularly workers without children earning less than £18,000 and female pensioners aged 60-64.
Q So what exactly is the Government doing about it?
A The personal tax allowance, which determines the level of income you can earn before paying tax, is to be raised by £600 this year from £5,435 to £6,035. The income needed to pay the higher 40 per cent tax rate has been dropped from £41,435 to £40,835
Q Who will the new measure help?
A Around 22 million people on low and middle incomes. They will gain an additional £120 this year under the change.
Of the 5.3 million households hit by the end of the 10p rate, 4.2 million will get as much or more than they originally lost and the remaining 1.1 million households will see their losses at least halved.
Higher earners will see the threshold at which they pay the 40p rate reduced by £600 to ensure they do not gain from the rise in personal allowance.
Q What about higher-rate taxpayers?
A They will be no better or worse off.
Q When will taxpayers get their hands on the extra cash?
A Basic rate taxpayers will receive a £60 lump sum in their September pay packets and then an increase of £10 a month until the end of the financial year.
Q Who will the big winners be?
A Basic rate taxpayers under the age of 65 whose earnings fall roughly between £17,000 and £40,000. The maximum extra paid to someone earning just under the £40,835 higher tax limit will be about £450 a year.
Q Any losers?
A No, but workers who lost out with the scrapping of the 10p tax rate will still be worse off, as the £120 will not be enough to compensate them for the loss in their take-home pay. This mostly affects the very low paid.
Q How much will the measure cost?
A An extra £2.7 billion will be needed to pay for the change, which will be funded by borrowing.
