BUDGET 2018: Tax boost for millions as personal allowance to rise from April 2019
Chancellor Philip Hammond said the personal allowance will go up from £11,850 to £12,500, cutting taxes for 32 million people.
It means a typical basic rate taxpayer will pay £130 less tax than in 2018/19 and increase the number of taxpayers taken out of income tax since 2015/16 to 1.74 million.
Hammond also confirmed that the higher rate tax threshold – the point at which you start paying 40% income tax – will increase from £46,350 to £50,000 from April 2019, one year earlier than expected.
The threshold will remain at the same level in 2020/21. This means there will be nearly one million fewer higher rate taxpayers than in 2015/16.
The government had pledged to raise the personal allowance to £12,500 and higher rate threshold to £50,000 by 2020 as part of its election manifesto.
Les Cameron, tax expert at Prudential, said: “The bringing forward of the £12,500 personal allowance and £50,000 higher rate threshold will be welcome to those on lower incomes but we mustn’t forget that increasing personal allowances are bad news for higher earners. Those with incomes over £100,000 will see an effective tax rate of 60% on £25,000 of their incomes.”