Your personal allowance

Income Tax

The amount of tax free income you can have in a year is called your personal allowance. It depends on your age; and can be affected by the level of your income. For couples one of whom is born before 6 April 1935 there is a Married Couple’s Allowance. Blind people can get an additional allowance called the Blind Person’s Allowance. We will see how this works by looking at the allowances individually.

  • The Personal Allowance
  • Age Allowance
  • How the Age Allowance works
  • Blind Person’s Allowance
  • Married Couple’s Allowance
  • Allowances for children

The Personal Allowance

Each tax year there is a basic amount of income that is tax-free. The amount of this ‘personal allowance’ is set for each tax year. For the tax year 2014-15 the basic personal allowance, available to all UK resident individuals born on or after 6 April 1948, is £10,000. (For 2013-14, the basic personal allowance is £9,440).

People born before 6 April 1948 are entitled to the ‘Age Allowance’ – see below.

People with income above £100,000 will have their personal allowance reduced – if their income is high enough, they will not get a personal allowance at all (over £120,000 in 2014-15; over £118,880 in 2013/14) .

Age Allowance

Up to 5 April 2013, there was a higher rate of personal allowance (often called the ‘Age Allowance’) for people aged 65 or more. From 6 April 2013, these allowances were frozen and are no-longer be available to new claimants.

Looking forward, there are two levels of age allowance: one for those born between 6 April 1938 and 5 April 1948, and the other for those born before 5 April 1938 (£10,500 and £10,660 respectively, from 2012/13 onwards).

The age allowances are targeted towards older tax payers who are also on lower incomes. If your income is below a set level (£27,000 for 2014-15; £26,100 for 2013-14) you will receive the full amount of the allowance. If your income goes above this set level, your age allowance will go down. It goes down by £1 for every £2 of extra income, until it becomes the same as the basic personal allowance.

This means that if you qualify for the age allowance for people born between 6 April 1938 and 5 April 1948, and your income is £28,000 or more in 2014-15 (£28,220 or more in 2013-14), your personal allowance will be reduced to £10,000 (£9,440 in 2013-14). If you were born before 5 April 1938, your income would need to be £28,320 in 2014-15 (£28,540 or more in 2013-14) for your personal allowance to be reduced to £10,000 (£9,440 in 2013-14).

Note: The income figure used to calculate any restriction on your age allowance is reduced by gifts to charity under the gift aid scheme and a few other items – like business losses.

Example:

If your income in 2014-15 is £27,500 (£500 over the limit) and you are aged 78, your personal allowance will be £10,660 less £250 (half of £500), so £10,410.

Blind Person’s Allowance

A person who is registered blind with a local authority in England and Wales is entitled to an additional amount of tax-free income. In Scotland or Northern Ireland you will qualify for the allowance if your eyesight is such that you are unable to perform any work where your eyesight is essential.

The allowance is £2,230 in 2014-15 and £2,160 for 2013-14. This allowance is given in addition to the usual personal allowance or age allowance.

A blind person who has not got enough income to use this allowance can transfer it, or part of it, to his or her husband or wife, or civil partner.

There are more details about the allowance on the HM Revenue and Customs website at http://www.hmrc.gov.uk/incometax/blind-person-allow.htm.

Married Couple’s Allowance

To qualify for the married couple’s allowance at least one member of the couple must have been born before 6 April 1935. This means that it is now only available to couples where one member was at least 79 on 5 April 2014. Since 5 December 2005, this allowance applies to civil partners as well as married couples.

The married couple’s allowance is different from all the other personal allowances. It is given as a reduction to the tax bill. The maximum reduction for 2014-15 £816.50 from the tax due (£791.50 in 2013-14).

The reduction of tax is worked out as 10% of the amount of the allowance. The allowance is £8,165 for 2014-2015 (£7,915 for 2013-14), but, like age allowance, the married couple’s allowance goes down by £1 for every £2 of income over the income limit (of £27,000 for 2014-2015, and £26,100 for 2013-14).

There is a minimum amount you will get, whatever your income. In 2014-15 this amount is £3,140 – that is £314 will be taken off your tax bill (£3,140 at 10%). The equivalent figures for 2013-14 are a tax saving of £304 (based on £3,040 at 10%).

If you are getting both age allowance and married couple’s allowance, and your income is over the income limit, then the age allowance is reduced first.

There are a number of elections relating to the married couple’s allowance and their impact on PAYE codings is complex. These issues are looked at in the section for Pensioners.

Further information on the married couple’s allowance can also be found on the HMRC website at

http://www.hmrc.gov.uk/incometax/married-allow.htm

TaxAid helpline

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