Alistair Darling’s second budget of 2008

After reviewing his options, Alistair Darling has now come up with a plan to avoid most of the backlash from the abolition of the 10p tax rate which his predecessor had introduced in his final budget in 2007.

The changes Mr Darling is proposing to introduce are all tax changes rather than the complicated offsets of tax credits and winter fuel allowances which had originally been suggested.

From that point of view the changes are much simpler to understand but they will still have winners and losers. One wonders whether he might not have been better to simply reinstate the 10p tax rate!

The changes are to increase the personal allowance and to reduce the level at which higher rate tax will become payable. The additional higher rate tax will then offset (to some extent) the reduction in overall tax bills which will result from the increase in the personal allowances.

There are, of course, some practical difficulties. These changes will not come into effect immediately but only later in the tax year. In other words we will all know how much tax we should be paying but will be paying more (or less) until the changes come into effect in the autumn.

So much for "simplifying" the tax system by abolishing a rate of tax!