Personal tax allowance to rise to £11,000

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Budget 2015: The personal tax allowance will be increased to £10,800 from April 2016, and to £11,000 from April 2017, Chancellor George Osborne has announced during the 2015 Budget.

The allowance, which is the amount employees can earn before they have to start paying tax, will enable the average taxpayer to save £905 a year by 2017-2018.

Mike Kelly, head of living wage at professional services firm KPMG, said: “With personal allowances growing to £11,000 before being subject to tax, it will mean that people on less than a living wage will only be £6.40 per week better off in 2017-18. Surely this isn’t good enough?

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“The fact remains that more than five million people are earning less than they need to live on and this change will not eradicate working poverty.”

Julie Hutchison, savings and tax expert at Standard Life, said: “The combination of a higher starting point for income tax, a new band of tax-free savings income, and the ability to transfer some unused personal allowance to a spouse or civil partner are all positive aspects which re-balance the tax system in favour of the saver.

”So if an employee is on a lower income, they will be able to keep more of their money and pay less tax.”