Tax changes to be introduced imminently will have an impact on businesses and employees alike.

Gordon Brown has announced in a budget speech that the income tax rate of 22% is to be reduced to 20% in April 2008.

Unfortunately the starting rate tax of 10% is to disappear altogether meaning that the 20% bracket will be reached by some who have previously not had to pay tax at more than 10%.

Further to this there will be changes in National Insurance contributions under which nobody will pay less than they do now, but some will pay more.

Taking these factors into consideration many people can expect a reduction in take- home pay, depending upon their earnings and personal circumstances.

There is also a further complication which will affect some people: If an individual makes personal contributions towards a Pension Plan then they will qualify for tax relief. For example a standard rate tax payer contributing £78 will have this made up to £100 by the Inland Revenue.

Once the changes are applied a standard rate tax payer will have to pay £80 in order to achieve the same £100 contribution level.

There might be more efficient ways of making pension contributions that your company can explore. If you would like further information on these issues, please contact Grahame at Tenon Financial Services on 0191 511 5171.