The basic rate limit will be £31,785 so the higher rate threshold above which individuals pay income tax at 40% will be increased to £42,385. The National Insurance upper earnings and upper profits limits will increase to stay in line with the higher rate threshold.  

The personal allowance will be increase to £10,600 rather than the orginally envisaged £10,500 in 2015-16, and in addition, the higher rate threshold will increase by inflation (1.2%).

George Osborne said the increase in 2015-16 will be worth £120 to a typical basic rate taxpayer and £172 to a typical higher rate taxpayer. Government analysis suggests 138,000 fewer  people will pay higher rate income tax, while the Chancellor indicated the eventual aim is to push the higher rate limit close to £50,000.    

Genevieve Moore, partner at Blick Rothenberg said: ‘138,000 people taken out of higher rate tax with the first increase in the 40% bracket for five years is a welcome announcement but still a long way to go before the £50,000 higher rate bracket is achieved.’

Iain McCluskey,  director, human resource services at PwC, said the Chancellor’s announcements  were consistent with the government’s long-term theme of taking more people out of income tax and would ‘certainly be welcome to lower and middle income earners’, as well as offering marginal benefit for people on incomes up to £100,000.

‘Today we also saw the first step towards the £50,000 higher rate commitment by the end of the next parliament, which was made at the party conference in September,' he added. 'Although there are obviously a lot of uncertainties including the election in May.’

Iain McCluskey, director, human resource services at PwC, said the Chancellor’s announcements were consistent with the government’s long term theme of taking more people out of income tax and would ‘certainly be welcome to lower and middle income earners’, as well as offering marginal benefit for people on incomes up to £100,000.

McCluskey said: ‘Today we also saw the first step towards the £50,000 higher rate commitment by the end of the next Parliament, which was made at the party conference in September, although there are obviously a lot of uncertainties including the election in May.’

Comparison of threshold and impact on taxpayers

Gross          2010-11      2011-12   2012-13   2013-14      2014-15   2015-16              2015-16

income  £                                                                                           pre-Budget          pre-AS 2014

10,000         1,180          840           670           380               250            230                230

20,000         4,280           4,040        3,870        3,580           3,450        3,410              3,310

30,000         7,380           7,240        7,070        6,780           6,650        6,610              6,510

40,000         10,480        10,440     10,270     9,980          9,850       9,810                  9,710

50,000         14,190        14,390     14,220     14,040        13,860     13,780               13,670

Source: Autumn Statement 2014