Budget 2011: Personal allowance to rise to £8,105 within next 12 months

Last updated: Mar 23rd, 2011
Feature by Johanna Gornitzki

Chancellor George Osborne claims this will result in 23 million people being £42 better off each year.

Speaking today, Osborne revealed that the income tax allowance threshold for under 65s will increase by another £630 by next April on top of the £1,000 rise coming into effect on 6 April this year.

An estimated 23 million working age people earning over £7,865 a year will gain from the personal allowance increase.

It will help offset the increase in national insurance contributions, which will occur in April when this is indexed by the consumer prices index - and the chancellor claims they will still gain on average £42 a year from next April.

This is a further step towards the government's commitment to increase the personal allowance to £10,000, he said. 

Osborne added that these measures will also take 1.1 million people out of income tax altogether.

At the same time, there will be a £630 reduction in the basic-rate limit, meaning the higher-rate threshold will remain unchanged.

In addition, Osborne also revealed the government has decided on a "huge change" to the UK's tax system by launching a consultation on whether to merge income tax and national insurance.

However, the chancellor admitted that bringing the two taxes together would take many years.

One to watch, however, might be the top rate of income tax of 50%, which Osborne said he regards as a temporary measure. He added that while now would not be the right time to remove the 50 per cent tax rate, it is "sensible to see how much revenue it actually raises".

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So what happens to the 65+ personal allowance does this remain the same in 2011/12 and 2012/13, is this another case of the forgotten majority having their pensions eroded by a stand still in their allowances,or have I missed something in the chancellors speech?
Regards John B

does this increase apply to retired people as well.

Do senior citizens who pay tax get the £1000 increase on their allowance too

Glad to hear the base line for paying income tax for the under 65 is to be increased. What about the oaps. This year under 65s base line increased by £1,000, but the poor old age pensioners had increase of only 450.

Does this meen that the rate for pensioners over 80 years is not going to linked ?

Don't know if I missed anything but has any change in tax allowances been granted to the over 65s.

Here we are again, no increase in over 65's personal allowances on top of losing income on savings. What next - bring back the workhouses - that'll kill us off and solve the problem!

The over 65s will not get the £1000 increase, but their higher rate allowance will be increased in line with inflation.

The allowance being granted to the over 65's is less than the allowance for under 65's. Eventually the allowances (10,000) will be the same.
Although the government has not said so this is the way it is going.

The allowance details can be found on your Notice of Coding.
Compare this years with last years to spot the difference.

It will also tell you the maximum earnings limit before it affects your tax code. Currently £24,000.

Over 65s saw an increase in personal allowances of £1480 between 2007/8 and 2008/9 compared with just £810 for under 65s. Maybe this is just a means of addressing that imbalance?

Having said that, if there are to be personal allowance increases for senior citizens they're often not worked out until the autumn when the CPI or RPI rate(I forget which) at that point is used to determine new levels of all state benefits.

Check your Notice of Coding - the personal allowance is there. Compare it with last years to find out the increase.