The chancellor increased the personal tax-free allowance from £5,435 to £6,035, compensating four out of five of the 5.3m who had lost out.

For most low to middle-income earners, the changes put them back where they would have been before the abolition. There are still losers, and higher-rate taxpayers may be unexpected winners.

We explain the overhaul.

What was announced?

In last year's budget, the government abolished the 10p income tax rate, which everyone paid on earnings up to £2,230 above the personal tax allowance.

The abolition paid for a 2p reduction in the basic tax rate from 22% to 20%. However, the move brought a backlash, forcing Darling to raise everyone's personal allowance by £600, backdated to April 6.

When will I see the benefit?

From September all taxpayers will see a one-off increase in their pay packet of £60 and then a rise of £10 per month for the rest of the tax year. That is a total £120 for all 22m taxpayers earning up to £40,835 (the new personal allowance of £6,035 plus the upper threshold for the basic-rate, £34,800).

How are higher-rate taxpayers affected?

Had the chancellor simply raised the personal allowance by £600, higher-rate payers would have been £240 better off - twice the benefit for those in the basic band - as £600 of income would have been taken out of 40% tax.

Darling reduced the level of income at which you start paying top-rate tax by £600 from £41,435 to £40,835. That will push another 150,000 people into the higher income-tax band, but this will be offset by the £120 benefit from the raising of the personal allowance.

Experts say higher-rate payers could benefit next year as in 2007 Gordon Brown pledged to align the upper earnings limit for 11% National Insurance contributions (Nics), now £40,040, with the point at which you start paying higher-rate tax.

Now that this threshold is lower (£40,835 instead of £41,435), Darling will get £240m less in Nics than he bargained for.

This is essentially an unplanned 10% tax cut on about £600 of earnings, leaving higher-rate payers £60 better off from April.

And lowest-income earners?

While about 600,000 people earning less than £6,035 will no longer have to pay tax, there are 1.1m households earning £6,035 to £13,355 that will lose out by up to £112 a year.

They lost by as much as £232 when the 10p rate was abolished and they will only gain £120 from the rescue package.

Childless workers under 25 or who work less than 30 hours a week lose most as they don't get working tax or family credits.

When do the changes come into effect?

The changes come into effect in September and are backdated to April 6. Darling will set out his proposals in November's pre-budget report.

How will it be paid for?

The government will borrow money to pay for the changes, expected to cost £2.7billion. Capital Economics said this could increase public sector debt by some 0.5% of GDP.