The Chancellor has revealed the tax-free personal allowance will rise by £1,000 for millions of workers.
Those under 65 will therefore pay no tax on their first £7,475 of income from next April, up from the current £6,475. The threshold will eventually rise to £10,000.
The Government says this will save the UK's 23 million basic rate taxpayers £170 a year, while it will mean around 880,000 people will no longer have to pay the tax at all.
The benefit will be paid for by higher earners as the threshold at which you currently pay the higher 40% tax (currently £43,875) will fall, with exact figures to be confirmed in the autumn, though a £2,500 drop has been mooted. It will then be frozen in 2013/14.
These changes will mean, for higher earners, a larger part of their income will attract the steeper 40% tax. Some experts have suggested an additional 700,000 people could pay higher rate tax as a result.
From next April, taxpayers will also pay an additional one percentage point in national insurance, which will cost someone earning £30,000 a year approximately £250. This was announced last year by the previous Labour administration.
Further reading/Key links
Tax rates: 2010/11 Tax Rates
Protect your pocket: Budget Planning