The personal allowance for tax-free income will rise to £11,850 from April and the 40% threshold will increase to £46,350, the government announced today in the Autumn Budget.
The Chancellor has used today’s Budget to increase the personal allowance for tax free income. Those earning below £11,850 will not pay income tax and that’s up from £11,500, where it is currently (designed to ensure that those working 30 hours a week on the national minimum wage do not pay income tax).
At the moment, a 20% ‘basic rate’ of income tax applies to earnings between £11,501 and £45,000. When you start earning £45,001 (up to £150,000) the amount you pay in income tax is 40%. That’s now been increased to earnings up to £46,350.
Chancellor Philip Hammond said: “When we came in to office the personal allowance was £6,475 per year from April will increase the personal allowance to £11,850 per year and the higher rate threshold to £46,350.”
The Chancellor has previously pledged to increase basic rate to £12,500 by 2020 and the higher threshold to £50,000.
The living wage has now risen to £7.83 a hour, up from £7.50 an hour. This is still below what’s described as the ‘real living wage’ which is £8.75 per hour around the UK and £10.20 in London.