Government to increase personal allowance and higher-rate tax thresholds

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Budget 2016: The tax-free personal allowance limit and higher-rate tax threshold will increase from April 2017.

In his 2016 Budget speech today (16 March), Chancellor George Osborne announced that the tax-free personal allowance limit, the amount an individual earns before they pay income tax, will rise to £11,500 from April 2017, an increase of £500 a year.

Osborne said: “That’s a tax cut for 31 million people. It means a typical basic-rate taxpayer will be paying over £1,000 less income tax than five years ago.

“And it means another 1.3 million of the lowest paid taken out of tax altogether.”

In last year’s budget, Osborne raised the personal allowance to £11,000 with a view to increase it to £12,500 by the end of the current parliament.

Osborne also announced that the higher-rate tax threshold will increase from £42,385 to £45,000 in April 2017.

He said: “It is going to lift over half a million people who should never have been paying the higher rate out of that higher tax band altogether.”