The Government is raising the income tax personal allowance to £10,500 next April.
Delivering his Budget today, Chancellor George Osborne said the personal allowance will rise further than the £10,000 next month.
The 40p income tax threshold will also rise from £41,450 to £41,865 this year and £42,285 next year.
At its conference in Glasgow last year, the Liberal Democrats voted to raise the allowance to £12,500 over the next parliament to take everyone earning the minimum wage out of income tax.
The allowance will rise to £10,000 next month, a policy pushed through by Lib Dems. Deputy Prime Minister Nick Clegg has attacked the Conservatives for claiming credit for raising the allowance even though they opposed it before the last election.
Osborne said: “Next year there will be income tax on the first £10,500. This is £800 less in tax for every taxpayer since 2010 lifting 3 million of the lowest paid out of income tax altogether.”