Chancellor Philip Hammond has fulfilled his party’s manifesto pledge to raise the Personal Allowance to £12,500, a year ahead of schedule.
From April 2019 the Personal Allowance will be £12,500 and the higher rate threshold will be set at £50,000. The basic rate limit will be increased to £37,500.
Hammond then plans to index both rates in line with the Consumer Price Index rate of inflation from 2021/22. The rates for 2020/21 will remain at the 2019/20 level.
The government estimates that, in 2019 to 2020, this measure will benefit 30.6 million individuals of whom 26.2 million will be basic rate taxpayers and four million are higher rate taxpayers. A basic rate taxpayer will have an average real gain of £66. A higher rate taxpayer will have an average real gain of £387. An additional rate taxpayer will have an average real gain of £236.
The increase in the Personal Allowance should also take 499,000 individuals out of Income Tax, and 479,000 individuals out of higher rate Income Tax in 2019 to 2020 compared to previously announced policy.
