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Your personal allowance and the Blind person's allowance reduce the level of your taxable income so you get some of your income tax free.
We explain briefly in this section how much the allowances are and how they work.
If your income is over £22,900, we also look at how this will affect your tax allowances.
You can get more information by clicking on the heading below:
Personal allowances
How does higher income reduce my personal allowances?
Blind person's allowance
Personal allowances
You will get a basic personal allowance no matter what your level of taxable income. A personal allowance reduces the amount of taxable income. The personal allowance is £6,475 for 2009/10 if you are under 65 throughout that year. The allowance is increased if you are 65 and over at any point in the tax year, depending on your age and income level. Between 65 and 74 the full personal allowance (also called age allowance or higher personal allowance) is £9,490 for 2009/10, rising to £9,640 for someone 75 and over. You can find more information on the amounts of tax allowances for the current and earlier years here.
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Sarah - age allowance - taxable income
Sarah aged 70 has taxable income of £12,000 for 2009/10. She is not married and has no other income.
Sarah's taxable income will be:
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| Income |
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| Less: Allowance |
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| Sarah pays tax on |
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- There is a further allowance that is similar to the personal allowance, called the Married couple's allowance, but this does not come off your taxable income in the same way. It reduces your tax bill instead. The allowance is being phased out and is now only available where one spouse or civil partner was born before 6 April 1935.
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Tax Tip
For gift aid payments - you can claim that the payment is to be treated as if it were made in the previous tax year.
So if it is likely that your taxable income will be above the limit where your personal allowances will be reduced for any tax year (you can find out more about this here) e.g. £22,900 for the tax year to 5 April 2010 (2009/10) - you may want to consider asking the Revenue to treat the gift aid payment you make in the tax year to 5 April 2011 (2010/11) as being paid in 2009/10 instead so that it reduces your income for the earlier year.
You need to make any claim on or before the date you send in your tax return for the year when you want payment to be treated as made and the charitable payments must be made by this date also. The final deadline for the 2008/09 tax return is 31 January 2010. So, for example, you can only carry back payments made to 31 January 2010 on your 2008/09 return.
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How does higher income reduce my personal allowances?
- If your taxable income before any allowances is more than £22,900 the situation gets more complicated. When we talk about "income" in this section we mean your income before allowances so the figure of £22,900 will include the taxable income you received and the tax taken off before you get it.
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Rita - income for age allowances
Rita aged 83 has income for 2009/10 of:
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Amount before tax taken off |
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| State Retirement Pension |
£5,500 |
(no tax) |
| Occupational pension (PAYE) |
£6,000 |
(tax £700 taken off) |
| Bank interest |
£6,000 |
(tax £1,200 taken off) |
Rita's taxable income will be: £5,500+£6,000+£6,000 = £17,500
Rita gets the full allowance for her age of £9,640 as her income is below £22,900.
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- You can only keep some of the higher personal allowance if your taxable income is below set levels. If your income for 2009/10 is over £28,930 for someone 65-74 (over £29,230 for someone 75 or over), your personal allowance will be the basic allowance that everyone gets of £6,475.
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Mick - income over limit for age allowance
Mick aged 69 received taxable income of £29,500 for 2009/10. His personal allowance will be the basic allowance of £6,475.
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- If your income falls between £22,900 and either £28,930 or £29,230 for 2009/10 your age allowance of £9,490 or £9,640 will be reduced but never below the basic allowance of £6,475.
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Joe - working out reduction in age allowance
Joe aged 78 received taxable income of £25,000 for 2009/10. He will therefore receive more than the basic allowance of £6,475 but less than the full age allowance of £9,640. To see how we work out what allowance Joe receives please follow the stages below.
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- To work out how much allowance you will get you firstly need your income. Have a look at the example Rita
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Joe has income of £25,000
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- From this figure deduct £22,900, giving you the amount that you have exceeded the limit.
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| Income before allowances |
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| Limit |
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- Divide the difference worked out above by 2.
| Amount over limit |
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2,100 |
| Divided by 2 |
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1,050 |
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- Take the figure you get from the full allowance of £9,490 or £9,640 to give you your allowance for the year.
| Joe's allowance |
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| Less: reduction worked out above |
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| Allowance Joe receives |
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If Joe had been under 75 the situation is exactly the same except that the full allowance would be £9,490 instead of £9,640.
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Tax Tip
In 2009/10 if your taxable income before allowances falls within the band £22,900 to £28,930(£29,230 for those 75 or over) you can pay tax up to 30% on your income between these 2 limits. You may like to see if a change to tax free investments could lower your tax bill while leaving your income after tax the same.
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Tax Tip
The gross amount of any Gift Aid donations you make reduces the level of your taxable income when working out what higher age related personal allowance or married couple's allowance you are entitled to. If you are aged 65 and over, or (for the married couple's allowance) you or your spouse or your civil partner were born before 6 April 1935, it is important that you enter details of your Gift Aid payments on your tax return or repayment claim to ensure you get all the allowances that you are entitled to.
If you are entitled to these allowances and do not receive a tax return, you should notify your Tax Office of the gross amount of any Gift Aid payments so that the Revenue can make sure you get all your available tax free allowances.
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Blind Person's Allowance
- Blind person's allowance (BPA) is an allowance of £1,890 for 2009/10. It reduces the amount of taxable income. Unlike the personal allowance you have to make a claim for it.
- You do not have to be entirely without sight to claim the BPA.
- You can claim if you are registered as blind with a local authority in England and Wales or for those people living in Scotland/N Ireland your sight must be so bad as to stop you performing any work for which eyesight is essential.
- If you are already seeing an eye specialist they will check your sight and, if appropriate, certify that you are blind. You can ask your GP to refer you to an eye specialist.
- Social Services should then contact you to see if you want to be added to the register, and if you do, then the date that the consultant signed your certification form is the date of registration.
- Once you are registered, contact your tax office (or your local tax office if you do not have one), as soon as possible and tell them that you want to claim BPA.
- If husband and wife or civil partners are both entitled to BPA they can each claim independently.
- If in the previous tax year you obtained evidence of blindness on which the registration will be eventually made, but you only registered the following tax year, you can claim the relief for both years.
- You can transfer any surplus BPA to your husband or wife or civil partner to reduce his or her tax. If you are 75 or over and claiming married couple's allowance, any surplus married couple's allowance must also be transferred at the same time.
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Patrick - transfer of BPA
Patrick is aged 77 and is married to Jan aged 76. His taxable income before allowances for 2009/10 was £6,500 and is less than his personal allowance. Patrick claims BPA and therefore £1,890 can be transferred to Jan, reducing the income she has that is charged to tax. Jan will also receive Patrick's Married Couple's Allowance (MCA).
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Tax Tip
If you are a non-taxpayer and your spouse or civil partner pays tax you can still transfer your BPA to them.
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