The latest report from the Ernst & Young Item Club, released today, expects to see the average earner receive £482 extra in 2012 and £624 extra in 2013. The changes will affect those earning less than £36,000 per year.

It was announced in the Budget in March that the personal tax-free allowance would be increased by £1,100 from £8,105 to £9,205 in April 2013.

Andrew Goodwin, senior economic adviser at Ernst & Young Item Club, said: “After the tightest squeeze on consumer incomes in a generation, the worst is now behind us and most people should start to feel a bit better off by the end of the year.

“Wage growth will finally begin to outpace inflation and our pay packets will also be boosted by the tax changes announced in the Budget.

“Only the top 10 per cent of the income distribution, earning above £36,000, and the bottom 10 per cent, who aren’t liable for income tax, won’t benefit from the increase in the personal allowance.”

This increase will hopefully create more spending growth. Ernst & Young forecast growth to be 0.8 per cent in 2012 and 1.1 per cent in 2013.

However, the report warned that spending would be constrained by those paying down debt and would not return to pre-recession levels until 2015.