In the budget today (3rd March 2021) the Chancellor of the Exchequer, Rishi Sunak, confirmed the the personal allowance for 2021/22 would increase to £12,570 as had previously been confirmed. 

However, he also confirmed that, in order to start to claw back some of the massive spending that needed to happen in order to finance payments during the coronavirus pandemic, the personal allowance would remain frozen at that level until  April 2026.

The personal allowance is the amount of money that can be earned before tax is paid. Once the level is passed, anyone who earns over £12,570 will need to pay tax at 20% for the amount of earnings between the personal allowance and the higher rate tax bracket.

In addition to this, the 40% tax bracket starting point, which will be increased slightly to £52,270 on 6th April 2021, will also be frozen for 5 years and will not be increased until at least 2026.

This means that as people start to see pay rises over the coming years, they may be pushed into a situation where they pay more tax or move into a higher tax bracket.

This announcement came alongside confirmation that the furlough scheme will be extended as will the SEISS scheme for the self-employed, plus there will be an extra £20 a week for those on Universal Credit and Working Tax Credit for the first 6 months of the 2021/22 tax year.

The stamp duty holiday will also be extended to the end of June with a partial amount also being available until the end of September.

The Capital Gains Tax allowance was also included in the budget and it was confirmed that this would increase to £12,300 for the tax year 2021/22 and then also remain at that level for 5 years until 2026.