The Chancellor announced in his Autumn Statement that the amount of money you are allowed to earn without paying tax is to be increased to £10,600 in April, £600 more than the current level.
George Osborne said that he hoped to be in a position to increase the limit further, aiming for a figure of £12,500 by 2020.
The Chancellor said the total benefit of all the increases in the personal allowance the coalition has made since 2010 means that people are better off to the tune of £825 per year.
The level of earnings at which the higher-rate income tax of 40% starts will also rise in April to £42,385 from £41,865.
Andrew Hagger, personal finance commentator from MoneyComms, said: “With the economy having turned the corner, the Chancellor is giving some money back to UK consumers. The first uplift in the higher-rate tax threshold since 2009 is another welcome move, with the limit being increased by £520 next year.”
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