By politics.co.uk staff
The personal allowance for under-65s took a step closer towards the Liberal Democrats' £10,000 goal in today's Budget.
Chancellor George Osborne had previously announced that the allowance would increase from April to £7,475, a £1,000 increase.
Today he revealed the personal allowance would rise by an extra £630 to £8,105 in 2012/13.
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"The coalition agreement commits this government to real increases in the personal allowance each and every year and sets this country the goal that no one earning less than £10,000 should be caught in the income tax net," Mr Osborne told MPs.
"This Budget today takes another step towards that valuable goal."
He said that over 1.1 million people will be taken out of income tax altogether, handing them an extra £326 in cash terms.
Only basic rate taxpayers were permitted the additional allowance last year, but that has changed this year. No more people will find themselves in the higher tax band as a result.
"The chancellor trumpeted the rise in the personal allowance, but let's look at the facts," Ed Miliband told the Commons earlier.
"He came along in the June Budget and put up VAT, costing families £450 a year.
"Now he's got the nerve to expect them to be grateful when he gives them a fraction of their own money back.
"Let me tell you what the Institute for Fiscal Studies told us this morning: 'there is an awful lot of giving with one hand and taking away with lots and lots of other hands'. It's the classic Tory con."
Shadow chancellor Ed Balls told reporters that pensioners deserved to feel disappointed by the Budget because they had not been included in the increase - but would be hit by the VAT hike.