Most people are allowed to receive a certain amount of income each year before paying tax. This is known as the basic personal allowance. But what is a personal allowance, when can you get it, and what sort of earnings is it actually set against?
What is a personal allowance?
Your personal allowance is the amount of money that you can earn each tax year before you pay income tax. It will vary depending on your circumstances.
Will I get a bigger personal allowance if I’m over 65?
In previous tax years, your personal allowance could have been more than the standard personal allowance as a result of when you were born. But this is no longer the case. For the 2016/17 tax year — running from 6 April 2016 to 5 April 2017 — the Personal Allowance is £11,000.
If you have a standard Personal Allowance of £11,000, the following table breaks down the tax rates you will pay for each area of your income:
|Personal Allowance||Up to £11,000||0%|
|Basic rate||£11,000 to £43,000||20%|
|Higher rate||£43,001 to £150,000||40%|
|Additional rate||over £150,000||45%|
However, your Personal Allowance could be higher or lower if you meet certain criteria:
Why you could get more
- Are you married, or in a civil partnership?
If you are, the Government's Marriage Allowance offers the opportunity to transfer £1,100 of your Personal Allowance to your husband, wife or civil partner. Your partner's income could then be tax free for the first £12,100 they receive; meaning their tax could be reduced by up to £220 within each tax year. However, you must earn less than your partner and have an income less than £11,000 to be eligible.
- Are you registered with your local council as blind, or severly sight impaired?
Should the answer be 'yes', then you can contact HM Revenue and Customs (HMRC) to apply for Blind Person's Allowance. If you are eligible, this adds a further £2,290 to your yearly tax-free Personal Allowance.
Why you could get less
- You earn over £100,000
Your Personal Allowance goes down by £1 for every £2 that your income is above £100,000. This means your personal allowance could reduce to zero if your income is above a certain level.
- You earn £122,000 or over
No personal allowance available.
What counts as income for the personal allowance?
Income refers to not only earnings from employment, but also rent income, any dividends from shares you may own, your pension income and any interest you earn on savings (before the tax is taken off).
Where can I find out more?
The best place to find every up to date detail of the Personal Allowance is the Gov.uk website. Read their webpage about Personal Allowances rates here.