What are allowances against income tax
This information gives details of the different types of allowances and when they can be claimed.
Personal Allowance and Blind Person's Allowance are fixed amounts that are set against your income, allowing you to receive that much income free of tax in any one tax year. A tax year runs from 6 April one year to 5 April the following year. Married Couple's Allowance works as a deduction from your tax bill. You may be entitled to receive more than one allowance.
Most taxpayers living in the UK on a day to day basis are entitled to Personal Allowance. Some taxpayers can claim Blind Person's Allowance and Married Couple's Allowance as well.
If you have paid some tax on your income and are entitled to an allowance and are not getting it, you should claim it from HM Revenue and Customs (HMRC) by phoning the Taxes Helpline on 0300 200 3300. If you have not received all the allowances to which you are entitled, you can make a backdated claim for them but there is a time limit for doing this. You can find more information about the time limit in Tax refunds.
In practice, if you receive earnings or an occupational pension, this income is taxed through the Pay As You Earn (PAYE) system. Depending on how you are paid, you will either get 1/52 of your Personal Allowance if you are paid weekly, or 1/12 of your personal allowance if you are paid monthly, as tax free pay every payday. After taking into account any other allowances or reliefs, the amount you earn or receive as pension above this level will be taxed. This means that allowances are spread equally over the year rather than you starting to pay tax only once earnings/pensions exceed the amounts of your allowances.
For more details about PAYE, see The Pay As You Earn (PAYE) system.
What allowances are available
The following tax allowances can be given:
For tax years from 2013/14 onwards, there are three amounts of Personal Allowance:
- a standard amount (the basic allowance) for people born on or after 6 April 1948
- a higher amount for people born between 6 April 1938 and 5 April 1948 inclusive
- the highest amount for people born before 6 April 1938.
Basic Personal Allowance
Most people born on or after 6 April 1948 get the basic Personal Allowance automatically. People with incomes over £100,000 get a reduced Personal Allowance or none at all, regardless of date of birth. The basic allowance is reduced by £1 for every £2 of income above £100,000. This may reduce the allowance to zero.
Most taxpayers born before 6 April 1948 are entitled to a higher Personal Allowance known as an age-related Personal Allowance. The amount depends on their date of birth and their income. The income limit for age-related Personal Allowance is £27,000 in the 2015/2016 tax year. If income is above this income limit, the age-related allowance is reduced by £1 for every £2 of income over the limit. However, the age-related allowance is not reduced below the level of the basic Personal Allowance unless income is above £100,000.
Before 6 April 2013, age-related allowances depended on age and income, rather than date of birth. People aged 65-74, or 75 and over, were entitled to higher allowances, but these were also reduced if income was above the income limit that applied at the time.
How much is Personal Allowance
Amounts for tax years from 2015/16
This table gives details of personal tax allowances and income limits for tax years from 2013/14 onwards. The allowances are reduced if income is above the relevant income limit.
Reduce your partner's tax by transferring them some of your personal allowance
You can transfer £1,060 of your personal allowance to your spouse or civil partner if:
- your annual income is £10,600 or less
- your partner's income is between £10,601 and £42,385
- you were born on or after 6 April 1935.
This will reduce the amount of tax your partner has to pay.
You earn £8,000 a year, and your personal allowance for 2015/16 is £10,600.
Your partner also has personal allowance of £10,600, but earns £15,000 a year. They will usually pay 20% income tax on everything they earn over £10,600. Transferring £1,060 of your personal allowance to them will bring their personal allowance up to £11,660 (£10,600 + £1,060), which means they won't pay income tax on their first £11,660 of earnings. This will reduce their income tax liability by £212.
Your personal allowance will be reduced to £9,540 (£10,600 minus the £1,060 you transfered to your partner).
You can make the transfer by registering your interest on GOV.UK.
Blind Person's Allowance
Blind Person's Allowance is an extra amount that can be set against set against your income, in addition to your Personal Allowance, allowing you to receive that much income free of tax in any one tax year.
In England and Wales, you can claim a Blind Person's Allowance for the whole tax year if you are registered blind with your local authority or if you become a registered blind person during the tax year. In Scotland and N. Ireland, where there is no register, you must be unable to perform any work for which eyesight is essential. So you do not necessarily need to be completely blind to claim the allowance.
In England and Wales, HMRC can also give you the allowance in the tax year before you registered as a blind person, if you obtained the evidence needed for registration during that tax year. This may help you if there is any delay with registering as a blind person.
If you are married or have a civil partner and cannot use all of your Blind Person's Allowance, you can ask HMRC to transfer the unused part of the allowance to your spouse or civil partner, whether or not your spouse or civil partner is blind. Any surplus Married Couple's Allowance, if you qualify for it, must be transferred at the same time. If both of you are registered as blind, you can each receive the allowance.
You can find more information about Blind Person's Allowance on the GOV.UK website at www.gov.uk.
Blind Person’s Allowance amounts
This table gives details of Blind Person’s Allowance for the current tax year and the four years before that.
Married Couple’s Allowance
To claim Married Couple's Allowance, you must be living together as a married couple or as civil partners and at least one of you must have been born before 6 April 1935.
The rules about Married Couple’s Allowance depend on the date you married or entered into a civil partnership, as well as the age of the older partner:
- If you married before 5 December 2005, the husband gets the Married Couple’s Allowance and the amount depends on the husband's income and the age of the older partner
- If you married or entered into a civil partnership on or after 5 December 2005, the partner with the higher income claims the Married Couple’s Allowance and the amount depends on the age of the older partner and the income of the partner with the higher income
- If you married before 5 December 2005 you can choose to have the rules which came in on 5 December 2005 applied to you so that the partner with the higher income gets the Married Couple’s Allowance. Contact HMRC to ask them about making the change.
You can apply to HMRC to share the minimum Married Couple's Allowance between you or, if you both agree, to transfer the minimum Married Couple's Allowance to your spouse or civil partner
You will be entitled to a Personal Allowance in addition to the Married Couple’s Allowance, and may also be entitled to a Blind Person’s Allowance.
More information about the Married Couple’s Allowance is available on the GOV.UK website at www.gov.uk and on the LITRG website at www.litrg.org.uk.
Married Couple’s Allowance amounts
This table gives details of the maximum and minimum Married Couple’s Allowance for each year, together with the income limit. You get the maximum allowance if your income does not exceed the income limit. If your income is more than the limit, the allowance is reduced but not below the minimum amount.
Married Couple’s Allowance is an amount that is taken off your tax bill, so you can only claim it if you pay tax. Your tax bill is reduced by 10% of the Married Couple’s Allowance to which you are entitled.
Any Married Couple’s Allowance taken off your tax bill can only reduce it to nil. Any excess is not repayable.
More information about how income over the income limit can reduce your Married Couple’s Allowance, including an interactive calculator to see how much you may get, is available on the GOV.Uk website at www.gov.uk.
Further help with tax problems
More information about tax allowances is available on the GOV.UK website at www.gov.uk.
Allowances for older people can be complex. For more information on personal allowances and to work out whether you should be paying tax in retirement, go to GOV.UK at www.gov.uk.
There is also information on tax for older people on the Low Income Tax Reform Group (LITRG) website at www.litrg.org.uk.
If you are aged 60 or over and on a low income and have a problem with your tax allowances which you can't sort out with HMRC, you may wish to contact TaxHelp for Older People (TOP). Their Helpline number is 0845 601 3321 (Mon-Fri 9.00am-5.00pm) or e-mail www.taxvol.org.uk. TOP may be able to arrange a home visit if your problem is better sorted out by a face-to-face meeting.