Government brings forward increase to personal allowance

Budget 2013: The government has brought forward its plans to increase the personal allowance to £10,000 to 2014/15.

It means the first £10,000 of an employee’s annual salary will be exempt from income tax as a result of the increase, which was originally intended for 2015.

Consequently, the average basic-rate taxpayer will pay £705 less income tax per year in cash terms from April 2014.

The personal tax allowance is already due to rise to £9,440 in April 2013 under measures announced in November 2013’s Autumn Statement.

The coalition government is committed to reducing the amount of income tax that employees pay. In 2010, the personal allowance was set at £6,475. Successive above-inflation increases totalling £3,525 will mean it has risen by more than 50% in four years.

Once the personal allowance reaches £10,000 in 2014/15, it will increase by the consumer prices index (CPI) in future years, starting from 2015/16, as set out in the 2011 Budget.