Personal Allowance

The personal allowance is currently £10,600, but will rise to £11,000 for everyone from April 2016 and to £11,200 from April 2017.

The Chancellor set out the government’s objective to raise the personal allowance to £12,500 in the lifetime of this Parliament.  Once the personal allowance has reached £12,500, it will automatically increase to match the equivalent of 30 hours a week at the national minimum wage for those aged over 21.

The basic rate band for income tax is currently charged on the first £31,785 of taxable income, but will increase to £32,000 in 2016/17 and £32,400 in 2017/18.

As a result, the higher rate tax threshold (taking into account the standard personal allowance), which is currently £42,385, will rise to £43,000 in 2016/17 and £43,600 in 2017/18.

The Chancellor also stated that the government’s aim was to increase the higher rate tax threshold to £50,000 by 2020.

For taxpayers who have income over £100,000 in a tax year, the personal allowance will continue to be withdrawn.  £1 of the personal allowance is lost for every £2 of income over the £100,000 threshold, so in 2015/16 people with income over £121,200 will not receive any personal allowance.  The £100,000 threshold will remain unchanged in 2016/17 and 2017/18.

The additional rate of 45% will continue to apply to income of over £150,000 in 2015/16.  This threshold should also apply to the 2016/17 and 2017/18 tax years.

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May 20

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