Workers will not pay any tax on the first £10,000 of their wages from next year - 12 months earlier than planned.
Bringing forward the increase in the income tax personal allowance will mean a cumulative cash benefit for typical basic rate taxpayers of £705 since the Coalition took power, according to Treasury figures.
From April, the allowance will go up as planned to £9,440 - a £200 boost for 24 million taxpayers, George Osborne said.
It will also mean 2.7 million working age adults have been taken out of income tax altogether in the new financial year.
The basic and higher rates of income tax will remain the same and the Government has stuck by its decision to reduce the top rate of tax on earnings over £150,000 from 50p to 45p next month.
Mr Osborne said: "When we came to office, the personal income tax allowance stood at under £6,500.
"In two weeks time, the allowance will reach £9,440 with the single largest cash increase in its history."
He added: "From 2014, there will be no income tax at all on the first £10,000 of your salary - £10,000 of tax-free earning.
"That's £700 less in tax for working families than when this Government came to office.
"Almost three million more of the lowest paid will pay no income tax at all.
"It's a historic achievement for this government and for hard-working families across the country."
Campaign group the TaxPayers' Alliance said the personal allowance increase would help to ease the burden of high living costs.
Matthew Sinclair, chief executive, said: "George Osborne has announced welcome relief for people struggling with the high cost of living.
"The cut in beer tax, the freeze in fuel duty and the higher personal allowance will all ease the pressure on family budgets.
"Unfortunately, the great limitation of this budget was that it relied far too much on complicated targeted reliefs instead of tax cuts across the board."
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