Workers across the UK will see their take home pay increase when the Personal Allowance and Higher Rate Threshold are increased from 6 April. This will cut income tax for 31 million people, and take 1.3 million of the lowest paid out of income tax altogether, compared to 2015-16.
To help those saving for the future, we will introduce the Lifetime ISA and increase the amount people can save tax free in an ISA, to 20,000.
And to make sure that hard working families who work, save and invest can pass the family home on to their children, the new Family Home Allowance will mean by 2020/21 a surviving partner can pass on 1 million without paying inheritance tax.
Financial Secretary to the Treasury, Jane Ellison said:
From April, millions of people will see their take home pay increase because of our action to raise the Personal Allowance and lift the National Living Wage. This is part of our plan to build a stronger, fairer Britain and we want to back peoples ambition to work hard, save and support their families.
The National Living Wage and the National Minimum Wage rates will increase from 1 April 2017
The National Living Wage for those aged 25 and over will increase from 7.20 per hour to 7.50 per hour. That means over 1,400 a year more for a full-time worker on the National Living Wage since its introduction.
The National Minimum Wage rates will also increase:
- for 21 to 24 year olds from 6.95 per hour to 7.05
- for 18 to 20 year olds from 5.55 per hour to 5.60
- for 16 to 17 year olds from 4.00 per hour to 4.05
- for apprentices from 3.40 per hour to 3.50
The Personal Allowance will rise to 11,500 and the Higher Rate Threshold to 45,000 from 6 April 2017
An increase to the personal allowance, to 11,500 in April will see a basic rate tax payer take home an extra 100 each year. The point at which those in England, Wales and Northern Ireland pay the higher rate of income tax will increase to 45,000.
The Lifetime ISA will be available from 6 April
The Lifetime ISA will allow adults between the ages of 18 and 39 to open an account and put away up to 4,000 each year and receive a bonus of up to 1,000 a year on their contributions until they turn 50. Funds can be withdrawn tax-free to put towards a first home or saved for later in life.
The total amount you can save each year into all ISAs will also be increased from 15,240 to 20,000 from 6 April 2017.
New inheritance tax rules to ensure people can pass on the family home
From 6 April 2017, many individuals will be offered a family home allowance so they can pass their home on to their children or grandchildren tax-free after their death.
The family home allowance will be added to the existing 325,000 Inheritance Tax threshold, meaning the total tax-free allowance will be:
- up to 500,000 for an individual
- up to 1 million for a surviving spouse or civil partner, by 2020-21
The allowance will be gradually withdrawn for estates worth more than 2 million.
Fuel duty will remain frozen for a seventh year
This will save the average driver 130 a year, compared to pre-2010 fuel duty plans.
New tax allowances for money earned from the sharing economy
From April 2017, there will be two new 1,000 tax-free allowances one for income from selling goods or providing services, and one for property income.
People who make up to 1,000 from providing goods or services such as sharing power tools, providing a lift share or selling goods they have made will no longer need to pay tax on that income.
In the same way, the first 1,000 of income from property, such as renting a driveway or loft storage, will be tax free.