The amount of money that people can earn before they are taxed will increase from £11,000 to £11,500 per year next month — rising to £12,500 by 2020.
The higher-rate threshold, above which people pay 40 per cent tax, will rise from £43,000 to £45,000, increasing to £50,000 by 2020 for those living in England and Wales. It will still begin at £43,000 in Scotland.
Patricia Mock, tax director at Deloitte, calculated that the changes to tax and national insurance would leave a basic-rate taxpayer £113 better off next year, assuming that they are not self-employed. A higher-rate taxpayer will benefit by £313 and an additional-rate taxpayer by £113. “In 2010-11 the personal allowance was £6,475 and the higher-rate threshold £37,400, so someone earning £25,000 has seen their tax bill reduce by £1,105 in cash terms over the period up to 2017-18,” Ms Mock said. “Someone earning £50,000 has seen a reduction of £1,230 in cash terms.