18th March 2015
The Chancellor has announced a further above-inflation boost to the personal allowance , which will mean a tax cut for 27 million people.
In today’s Budget statement, George Osborne said reiterated that in two weeks’ time the allowance will reach £10,600 before rising to £10,800 next year and £11,000 the year after.
He said: “That’s £11,000 you can earn before paying any income tax at all.
“It means the typical working taxpayer will be over £900 a year better off.”
Osborne added: “For the first time in 7 years, the threshold at which people pay the higher tax rate will rise not just with inflation – but above inflation.
“It will rise from £42,385 this year to £43,300 by 2017-18.”
He also announced that the rate of the new transferable tax allowance for married couples will rise to £1,100.
Calculations by Deloitte show that increases in the higher rate threshold to give higher rate tax payers extra £103 in 2016/17 and £160 in 2017/18
Basic rate and higher rate tax payers with savings income will receive tax saving of up to £200.
Deloitte tax director, Patricia Mock, said: “Whilst the personal allowance for 2015/16 is to increase to £10,600 as trailed in the Autumn Statement, the Chancellor intends to increase these further to £10,800 in 2016/17, and to £11,000 in 2017/18. These increases are consistent with the agreed Conservative and Liberal Democrat policy of increasing the personal allowance to £12,500 by 2020 and will take another 247,000 people out of tax altogether in 2016/17, with another 341,000 to follow in 2017/18.
“The higher rate threshold will remain at £42,385 in 2015/16 giving a basic rate band of £31,785. This compares to the 2014/15 higher rate threshold of £41,865 and the basic rate band of £31,785. However, in 2016/17 and 2017/18 the higher rate threshold will increase, to £42,700 and then £43,300, giving basic rate bands of £31,900 and £32,300 respectively.”
The overall cost of these increases are predicted to be £960 million in 2016/17 and £1.48 billion in 2017/18, said Deloitte.