As expected, the chancellor has announced that the ‘personal allowance’ (the amount of tax free income an individual can earn before paying income tax) will increase to £10,500. This will remove further low earnings from income tax altogether.
In addition there will also be a small increase to the 40% tax band to £41,865. This will start to relieve the pressure on middle earners who have found themselves paying 40% tax for the first time over the past couple of years.
These changes were largely expected and have been rumoured for some time. The previous rules that reduced the personal allowance for those with incomes of £100,000 or more remains in place, and detailed planning will still be required for those with incomes of just over this amount.
