Britain's workers will take home more of their income from April onwards, when the personal allowance goes up to £10,600.
The amount that can be earned before tax is applied will increase again, to £10,800, in 2016, and then go up to £11,000 in 2017.
For those paying the higher rate of tax, at 40 per cent, the threshold will also get higher, to £42,700 in 2016, and £43,000 the following year.
The move to allow taxpayers to keep more of their income is one that Osborne has made before – PwC tax director Iain McCluskey said: “The chancellor pulled a familiar looking rabbit out of a now well- used hat.”
However, it is a policy that was first set out by the Liberal Democrats in their manifesto ahead of the 2010 election. At that time, the party was aiming to take the personal allowance to £10,000.
The Lib Dems said yesterday that they had “fought tooth and nail to cut taxes for workers” while in government, against initial opposition from the Tories who deemed the policy unaffordable.
Meanwhile, people in marriages or civil partnerships will also keep a little more of their earnings, with the new transferable tax allowance for married couples set to rise to £1,100.
And Osborne delivered some good news for drivers, as he revealed that fuel duty will remain frozen, despite previously announcing that the duty would increase by 0.5p this September.
A BRIEF HISTORY OF TAX
When the coalition came to power in 2010, the personal allowance was £6,475. It has since been increased at every Budget. In his first emergency budget in June 2010, Osborne increased the threshold at which workers pay income tax by £1,000. In 2012, it went up again, to £8,105, and in 2013 the allowance jumped to £9,440. Last year, it reached £10,000, and next month the personal allowance will go up to £10,600, before hitting £10,800 in 2016. The Lib Dems will pledge to push it to £12,500 in its election manifesto this year.