Understanding Personal Allowance

PieOPah

So as we mentioned earlier, the headline giveaway is the hike to the personal allowance to £9,205 in April 2013, a rise of £1,100.
Most people will earn £220 more as a result, said Osborne, before adding: "This is the largest ever increase in the personal allowance."
(quoted from msn website)

So, what does this actually mean? My initial thought is that I would be paying £1,100 less tax a year so in theory I would have £91.67 extra a month in my pay pack. However, the line 'Most people will earn £220 more as a result, said Osborne' made me wonder if I just don't get it...

dazza.mk

PieOPah wrote: »

So as we mentioned earlier, the headline giveaway is the hike to the personal allowance to £9,205 in April 2013, a rise of £1,100.
Most people will earn £220 more as a result, said Osborne, before adding: "This is the largest ever increase in the personal allowance."
(quoted from msn website)

So, what does this actually mean? My initial thought is that I would be paying £1,100 less tax a year so in theory I would have £91.67 extra a month in my pay pack. However, the line 'Most people will earn £220 more as a result, said Osborne' made me wonder if I just don't get it...

It means that you can earn an additional £1,100 without paying any tax therefore £1,100 x 20% (Basic Rate Tax) = £220 Tax saving

PieOPah

I've just done the maths on a spreadsheet and I think I understand it....