Personal allowance will rise to £10,500 in April 2015, the Chancellor has announced.
The allowance is set to reach £10,000 this April, providing a tax cut for 25 million people.
The £10,500 personal allowance will come into effect the following year, saving around £800 for the typical tax payer and pushing 3 million people out of the income tax bracket.
The Chancellor said the aim of this is to “Help hardworking people keep more of what they earn and what they save”.
The higher rate threshold will rise to £41,865 from this April and will rise by a further 1% next year.