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Tax changes for 2011–12: Income tax and allowances

In 2011–12, the personal allowance for people under age 65 will rise by £1,000 to £7,475. To ensure that the increase targets help on the less well off, the threshold at which the higher rate starts has been reduced to £35,000.

For the better off, this reduction will increase the amount of income taxed at the higher rate, cancelling out the benefit from the increase in personal allowance.

Other allowances and thresholds have been uprated in line with price inflation up to September 2010. Age-related allowances will rise to £9,940 (65 to 74) and £10,090 (over-75s).

The limit at which the higher age-related allowances start to be lost will increase from £22,900 to £24,000.

The personal allowance will continue to be reduced for people of all ages with income over £100,000 a year (£1 of allowance is lost for each £2 of income over the £100,000 threshold), and additional-rate tax will continue to be applied for earnings over £150,000.

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