Autumn Statement: Personal allowance to rise more than expected

Pound coins

From next April, the personal allowance will rise by a further £235 on top of the already announced increase of £1,100, Chancellor George Osborne announced today.

That means a total increase of £1,335 – the equivalent of £267 more in your pocket each year and the highest cash rise ever.

In total, from the next tax year people will be able to earn £9,440 before paying any income tax, up from the current limit of £8,105 (2012/2013).

Osborne says: "This is a direct boost to the incomes of people working hard to provide for their families.

"People working full-time on the minimum wage, will have seen their income tax bill cut in half.

"And we are within touching distance of the £10,000 personal allowance."

He adds: "And this time, I propose to extend the benefits of this further increase to higher-rate taxpayers."

The Chancellor’s Autumn Statement also revealed that the higher-rate income tax threshold will rise by 1% in 2014/2015 and 2015/2016.

You currently have to earn £41,450 (on top of your personal allowance) before you have to start paying 40% income tax on anything you earn above that amount. But with the changes, this will rise to £41,865 in 2014/2015 and then to £42,285 in 2015/2016.

But while it is an increase, it fails to keep up with the rate of inflation – currently at 2.7% (consumer prices index), meaning that in real terms the increase will not be able to keep up with rising living costs.

Osborne admits this is the case: "I want to be completely clear with people. This is an increase; in fact, it is the first cash increase in the higher-rate threshold in this Parliament.

"But it is not an increase in line with inflation, and so it raises £1 billion of revenue by 2015/16."

He adds: "Again, there are no easy ways to reduce the deficit – but from year to year, no one will pay a penny more in income tax."

Your Comments

Provided you are NOT a pensioner! Their tax allowances are frozen. My tax should have reduced but I will pay the same as last year - well, actually more as the state pension is increasing so my tax allowance reduces. Osborn is an expert at semantics.

Pleased as I am about the increase in the personal allowance, (being a low paid part-time worker), I still don't think many people realize part -time workers are STILL worse off thanks to Gordon Brown ending the 10% tax rate as I only ever paid 10p in the £ whereas I now pay 20p. I think we will suffer from Gordon Browns incompetance for many years to come, and Labour ALWAYS help "the workers" yeah right........

Pensioners especially those on half state pension who rely on interest from savings have quite literally been bludgeoned by the freefall of interest rates following Funding for Lending
2.5% increase in State Pension will not begin to tackle the increases in the most basic essentials like food heat and light
Savings income has plumetted by 2/3rds and the Treasury fail to recognise the loss of spending power , growth , gdp and tax revenue this has created
theres 7 savers to every 1 Mortgage holder so the sums do not add up

No idea where the figures come from in this article. According to HMRC personal allowance for 2012-2013 is £8105 and basic rate tax is paid on next £34370 (£42475 gross). From autumn statement PA increases to £9440 from April 2013 giving £43810 gross. From April 2014 basic rate band rises 1% (to £34714 rounded up) giving a gross income of £44154 before higher rate tax applies. From April 2014 basic rate band rises another 1% giving a gross income of £44501 before higher rate tax applies (assuming no further increase in PA).