The government has announced a further increase in the rate of the personal allowance, the amount that any individual can earn before having to pay tax on their earnings. The personal allowance will increase to £10,500 per annum with effect from April 2015, an increase of £500 from the rate of £10,000 per annum which comes into effect on 6 April 2014.

In addition to this, as previously reported, couples will be able to transfer £1,000 of their personal allowance to a spouse if they do not use it all, thus giving another possible saving of £200 a year to couples.

In the last few years the personal allowance has increased above the rate of inflation to the rate of £10,000 a year. This has taken a large number of, in particular, low earners out of the taxpaying system. However, it has now been mooted that the personal allowance should be increased again up to £12,500 per annum.

There are obviously plus points to increasing the personal allowance to this level and more people will end up not paying any tax at all. But there are also a few disadvantages:

Charity donations: at present, any donations that are made to charity can also claim a tax rebate if the person making the donation claims gift aid. However, they can’t do this if they don’t pay the equivalent amount of tax.

Pensions: When the government brought in auto-enrollment to company pension schemes, individuals were enrolled if they more than the personal allowance, therefore if the personal allowance is increased then less people will be enrolled automatically in company pensions. This is bad news as low earners are less likely to enroll by themselves.

However, obviously in these hard times any increase in take home earnings is welcome, particularly for low earners and so most people welcome the increase in the personal allowance.

UKIP have put together a proposal for a higher rate of the UK personal allowance (£13,000) that would also be transferable between husband and wife, as well as a flat rate tax of 25% for all.

This would be paid for by scrapping various other current UK policies including overseas aid. Further info can be found on the Money Marketing website.

David Cameron has confirmed that he will put on the table a proposal for a new married couple’s tax allowance before the next general election.

The previous married couple’s allowance was abolished by Labour’s Gordon Brown in 1999 but David Cameron wishes some kind of new allowance to be introduced to help in particular those couples where one party works and the other does not – the allowance would be transferable. It was set out in the Conservative Party manifesto and David Cameron wants to stick to this promise, even though the Liberal Democrats are against it.

Get further info on the Daily Mail website.