Finance (No. 2) Act 2015

3 Personal allowance and national minimum wage

(1) After section 57 of ITA 2007 insert—

“57A Personal allowance linked to national minimum wage

(1) This section provides for increases in the amount specified in section 35(1) (personal allowance).

(2) It applies in relation to a tax year if—

(a) the relevant national minimum wage at the start of the tax year is greater than it was at the start of the previous tax year, and

(b) the amount specified in section 35(1) immediately before the start of the tax year is at least £12,500.

(3) For the tax year, the personal allowance specified in section 35(1) is to be the yearly equivalent of the relevant national minimum wage at the start of the tax year.

(4) Subsections (1) to (3) do not require a change to be made in the amounts deductible or repayable under PAYE regulations during the period beginning on 6 April and ending on 17 May in the tax year.

(5) Before the start of the tax year the Treasury must make an order replacing the amount specified in section 35(1) with the amount which, as a result of this section, is the personal allowance for the tax year.

(6) For the purposes of this section, the “relevant national minimum wage”, at any time, is—

(a) the hourly rate prescribed under section 3(2)(b) of the National Minimum Wage Act 1998 in relation to persons aged 21, or

(b) if no hourly rate is so prescribed in relation to such persons, the single hourly rate prescribed under section 1(3) of that Act.

(7) For the purposes of this section, the yearly equivalent of the relevant national minimum wage at any time is the amount equal to—

where NMW is the relevant national minimum wage at that time.”

(2) In section 57 of ITA 2007 (indexation of allowances), at the end insert—

“(8) This section ceases to have effect in relation to the amount specified in section 35(1) when that amount becomes (by virtue of this section or otherwise) an amount of £12,500 or more.”

(3) In section 1014 of ITA 2007 (orders and regulations), in subsection (5)(b), after sub-paragraph (ii) insert—

“(iia) section 57A (personal allowance linked to national minimum wage),”.