Income Tax Act 2007 section 57

Indexation of allowances

Section 57 provides the mechanism for annually increasing certain personal tax allowances and related amounts in line with inflation, as measured by the Consumer Prices Index.

• Specified allowances (personal allowance, blind person's allowance, married couple's/civil partner's amounts and minimums) are increased each year if the September Consumer Prices Index is higher than the previous September's figure
• The increase is calculated by applying the percentage rise in CPI to the previous year's figure, rounding up to the nearest £10 for allowances and amounts, or the nearest £100 for adjusted net income limits
• Employers are given a transitional period from 6 April to 17 May each tax year before they must reflect the new figures in their PAYE deductions
• The Treasury must issue a statutory order before the start of the relevant tax year formally replacing the old figures with the newly indexed amounts