The government has published the personal allowance for 2021/22 on its website and as such has confirmed that it will increase by the increase in the Consumer Prices Index for September 2020 which stood at 0.5%.

The personal allowance is the amount of money that each person can earn before paying tax on their earnings (assuming you have the standard personal allowance figure). For any earnings in the tax year above this figure, tax at the standard or higher rate needs to be paid.

As the personal allowance for 2020/21 was £12,500 (and had been for 2019/20 as well), the increase brings it up to £12,570 per annum.

This is a very small increase and will mean only a saving of £14 a year for a basic rate tax payer. For higher rate tax payers the saving will be higher depending on their earnings.

Other tax allowances for the different tranches of tax rates have also been increased  by the same CPI rate (0.5%) and you can find these updated figures on the UK tax rates at a glance page.

The new personal allowance will reflect in the standard tax code for employees who do not have any other special tax allowances – giving a tax code of 1257L for the tax year 2021/22.