The Government has confirmed the tax-free personal allowance will increase to £12,500 by the end of the current parliament.
Announcing the Autumn Statement today, Chancellor Philip Hammond says the higher rate of income tax threshold will also move to £50,000 over the period.
Hammond says that once the £12,500 allowance has been introduced the personal allowance will automatically increase after 2020 in line with inflation rather than with the national minimum wage, which is currently planned.
He did not commit to further threshold changes after 2020, however, saying that “it will be for the Chancellor to decide what is affordable.”
In the March Budget, former Chancellor George Osborne raised the personal allowance to £11,500 from April 2017.
At the same time, the threshold at which employees pay the higher 40 per cent rate of income tax was moved from £42,385 to £45,000.