Chancellor George Osborne has increased the personal allowance to £11,000 from 2016/17.
The change to the threshold goes beyond the original Conservatives plans for a personal allowance of £10,800 next year. The Government plans to raise the allowance to £12,500 in the term of the parliament.
Osborne said: “We will now legislate so that the personal allowance always rises in line with the minimum wage, and we never ask the lowest paid in our society to pay income tax.
In addition, Osborne used his Budget speech to unveil a new tax cut for middle income earners by raising the level at which workers pay the 40p tax rate.
The plans were first hinted at by Prime Minister David Cameron at last year’s Conservative party conference, at he pledged to raise the threshold for a 40p tax rate to £42,700 in April 2016 and £43,300 from April 2017.
Instead, the Chancellor announced the threshold for the 40 per cent tax rate will be increased to £43,000 from next year, as part of plans to ultimately raise the threshold to £50,000.
Osborne added: “A personal allowance of £11,000. A higher rate threshold of £43,000. 29 million people paying less tax. A downpayment for a country on the up.”