Millions of UK taxpayers are set to benefit from new tax measures which could see them £120 better off.

Millions of UK workers are set to receive a tax rebate of around £60 in September when new measures introduced by Chancellor Alistair Darling come into effect.

The move, introduced to ease the impact of the government’s scrapping of the 10p tax band, will see basic rate taxpayers a total of £120 better off over the rest of the tax year.

Workers will have £60 less taken from their September paychecks whilst their net pay will rise £10 per month for the following six months.

The u-turn comes after Prime Minister Gordon Brown’s decision – when he was Chancellor – to cut the 10p tax band and reduce the rate of income tax from 22% to 20% left millions of the country’s lowest paid workers worse off.

To offset the effect of axing the 10p tax rate, Chancellor Darling has increased the UK personal tax allowance £600 to £6,035.

In addition, so that higher rate taxpayers don’t benefit from the move, the higher level tax band has been cut £600 and will start at £40,835.

The changes are expected to leave a £2.7 billion hole in the government’s finances, however many analysts are predicting it could stimulate the economy if taxpayers choose to spend their rebate on consumer goods.

The current changes are effective for the remainder of the 2008/09 tax year only and it has not yet been revealed whether Chancellor Darling will make any more changes to personal tax allowances in his next budget.

For more information on UK income tax rates, visit: www.direct.gov.uk

By Natasha Piscitelli