However, Hammond also told MPs that once £12,500 has been reached, the personal allowance will rise automatically during the 2020s in line with inflation, rather than the National Minimum Wage as currently planned.

‘It will be for the Chancellor to decide from year to year whether more is affordable,’ he said.

Iain McCluskey, PwC partner, said: ‘The rise in the personal allowance now makes it close to double the size it was in 2010, taking millions out of paying income tax during that time. Will this help those just about managing, the so-called “Jams”? 

‘Certainly not the lowest paid who currently earn less than the personal allowance so will feel no benefit.  Low paid “Jams” will be disappointed that the Chancellor has chosen to continue to cut the tax bills of those earning over £40,000 before helping those earning between £8,500 and £11,000.

'He could have done this by raising the national insurance primary earnings threshold substantially.  Some of our lowest paid workers, such as apprentices, part-time workers and those on zero hours contracts, will feel they have been dealt a losing hand.’

Higher rate taxpayers are likely to benefit more immediately from the upscaling of the personal tax allowance, but the impact of the costs of national insurance contributions (NICs) also needs to be considered.

Patricia Mock, tax director at Deloitte said: ‘The increases in allowances and bands give differing tax savings for basic and higher rate taxpayers and the effect of NIC must also be taken into account.

‘Comparing allowances and basic rate band for 2016/17 of £11,000 and £32,000 with those of £12,500 and £37,500, (to give a higher rate threshold of £50,000), which the Chancellor committed to, gives a tax saving over the period of £1,700 for a higher rate taxpayer and £300 for a basic rate taxpayer.’

Higher income child benefit charge risk

Anita Monteith, ICAEW tax manager, said: 'When raising the threshold the government also needs to address the cliff edge for middle income couples suffering the higher income child benefit charge (HICBC), affecting in particular couples where there is just one earner. £50,000 is also the threshold for this charge.

'The solution is to either raise the £50,000 HICBC threshold which has not changed since its introduction in 2012 – or rethink the policy altogether.'

The rise in the personal tax-free allowance once again creates confusion with a £10,000 proposed threshold for the quarterly reporting requirements for businesses under Making Tax Digital.