According to a report in the Sunday Times, the coalition government is close to finalising a deal that would take the allowance “towards £11,000” per year from April.
The current income tax personal allowance for most people is £10,000 – up from £9,440 in 2013-2014 – and is set to rise to £10,600 next month.
But Osborne is set to announce at Budget 2015 on 18 March that it will increase again by about £200, according to the report which cited a “senior government source”.
The newspaper said the final figure will be decided later this week at a meeting of the “quad” of senior cabinet ministers: Osborne, Prime Minister David Cameron, Nick Clegg and Danny Alexander.
Should the allowance be raised to £11,000 it would cost nearly £2.7bn.
With the increase as it stands – to £10,600 – some 24.4 million people will pay less tax from next month, while a further 430,000 will no longer pay any income tax in 2015-2016.
The higher-rate tax threshold, above which income is taxed at 40%, will also increase from £42,285 to £42,385 in 2015-2016 as a result of the move to up the tax free personal allowance.
