Budget 2011: Personal tax allowance to increase by a further £630

The personal allowance for under 65s will be increased by a further £630 in April 2012.

This increase, in addition to the £1,000 increase due to come into force from this April, will mean the personal allowance will stand at £8,105 in 2012-13.

This year’s personal allowance increase occurs alongside the switch to using the consumer price index (CPI) as the basis for indexation of the employee and self-employed national insurance (NI) threshold. The default indexation assumption for direct taxes will be the CPI from April 2012.

The Budget report stated: “To ensure employers and older people do not lose out, for the duration of this Parliament, the annual increases in the employer national insurance contributions (NICs) threshold, and the age related allowance and other thresholds for older people, will be over-indexed compared to the CPI, and will increase by the equivalent of the Retail Price Index (RPI).”

The government will also review the use of the CPI for indirect taxes.

Read more articles on the budget’s impact on benefits