O2 has announced new tariffs for its Pay Monthly customers that include internet tethering for no extra charge.

This means that iPhone 4 owners will be able to move onto one of O2's tariffs and take advantage of the Personal Hotspot feature in iOS 4.3 for no extra cost. This will allow them to use internet-enabled devices such as the iPad and iPad 2 via the iPhone 4's 3G connection.

ComputerWOrldUK sister title Macworld explained last week that iPhone 4 owners planning to buy the iPad 2 needn't opt for a 3G-enabled model as they could use the Personal Hotspot feature instead.

O2 announced its new tariffs this week, saying that it would also be offering shorter, 12-month contracts. Previously, O2 customers that wanted internet tethering had to pay £7.50 for a special 'bolt-on'.

"For the first time, Internet Tethering (using your phone as a modem to connect your laptop to the internet) is completely included in our data allowances, so you don’t have to pay a penny extra for it. That’s £7.65 additional value built into your tariff," the company wrote on its blog.

The new tariffs work on a three-step process - you choose a handset (or choose to keep your existing one) and contract length, pick your monthly call and text allowance, and choose how much data you want to use per month.

Existing customers will be able to move to the new tariffs, providing they move to one "of equal or greater value" - in other words, you can only choose a tariff that costs you as much or more as you pay already. O2 said the best way for existing customers to get themselves onto the new tariffs was over the phone.

The maximum monthly data limit for O2's new tariffs is 1GB - should you want to go over that, you will need to pay for an extra bolt-on. Those who go over their data limits without getting the bolt-on will find their connections speeds reduced until they receive their next bill.

Rival network operator Three offers a plan that includes tethering for no extra cost, whereas customers of T-Mobile, Orange and Vodafone have to pay £5 per month for the feature.