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 the basics about these allowances in our Low income workers section. Below we go on to describe how the higher allowances for those aged 65 or over are reduced if your net income for working out your tax is over £25,400 for 2012/13.
We also note some further points about blind person’s allowance in situations whether other allowances are available for older people.
You can get more information using the links below:
Personal allowances
How does higher income reduce my personal allowances?
Blind person's allowance
- Here we follow on from our basic description of personal allowances to give more details of those available to older people.
- To recap, the basic personal allowance is £8,105 for 2012/13 if you are under 65 throughout that year. The allowance is increased if you are 65 or over at any point in the tax year. The exact amount you will get depends on your age and income level.
- Between 65 and 74 the full personal allowance (also called age allowance or higher personal allowance) is £10,500 for 2012/13, rising to £10,660 for someone 75 and over. You can find more information on the amounts of tax allowances for the current and earlier years in our Tax and NIC rates section.
| Sarah - age allowance - taxable income Sarah aged 70 has taxable income of £12,000 for 2012/13. She is not married and has no other income. Sarah's taxable income will be: | | | £ | | Income | | | 12,000 | | Less: Allowance | | | 10,500 | | Sarah pays tax on | | | 1,500 | |
- 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.
Back to the top
- If your taxable income before any allowances is more than £25,400 (for 2012/13) the situation gets more complicated.
- When we talk about "income" in this section we mean your income before allowances so the figure of £25,400 will include the taxable income you received and the tax taken off before you get it.
- However your income for working out the amount of your higher personal allowance is reduced by the gross amount of any gift aid payments you make. The amount donated to the charity is treated as having been paid after deduction of basic rate income tax at 20%.
The gross amount you deduct from your income is the net amount you actually pay to the charity plus the 20% tax taken off. An easy way to work out what this 20% tax figure will be is simply to divide the net payment you make by 4.
| Rita - income for age allowances Rita aged 83 has income for 2012/13 of: | Amount before tax taken off | | | State retirement pension | £5,500 | (no tax taken off) | | 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 £10,660 as her income is below £25,400. |
- You can only keep some of the higher personal allowance if your taxable income is below set levels. If your income for 2012/13 is over £30,190 for someone 65-74 (over £30,510 for someone 75 or over), your personal allowance will be the basic allowance that everyone gets of £8,105.
| Mick - income over limit for age allowance Mick aged 69 received taxable income of £31,500 for 2012/13. His personal allowance will be the basic allowance of £8,105. |
- If your income falls between £25,400 and either £30,190 or £30,510 for 2012/13, your age allowance of £10,500 or £10,660 will be reduced but never below the basic allowance of £8,105.
- If your income is over £100,000 your basic personal allowance of £8,105 will be reduced by £1 for each £2 of income until there is no allowance left.
| Joe - working out reduction in age allowance Joe aged 78 received taxable income of £27,400 for 2012/13. He will therefore receive more than the basic allowance of £8,105 but less than the full age allowance of £10,500. To see how we work out what allowance Joe receives please follow the stages below. |
- To work out how much allowance you will get you firstly need your income. Have a look at the example Rita.
| Joe has income of £27,400 |
- From this figure deduct £25,400, giving you the amount that you have exceeded the limit.
| | | £ | | Income before allowances | | | 27,400 | | Limit | | | 25,400 | | Difference | | | £2,000 | |
- Divide the difference worked out above by 2.
| Amount over limit | | 2,000 | | Divided by 2 | | 1,000 | |
- Take the figure you get from the full allowance of £10,500 or £10,660 to give you your allowance for the year.
| Joe's allowance (he is over 75) | | | 10,500 | | Less: reduction worked out above | | | 1,000 | | Allowance Joe receives | | | £9,500 | If Joe had been between 65 and 74, the situation would have been exactly the same except that the starting point for the calculation would be a full allowance of £10,660 instead of £10,500. |
| Tax Tip In 2012/13 if your taxable income before allowances falls within the band £25,400 to £30,190(£30,510 for those 75 or over) you effectively pay tax up to 30% on your income between these two 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. |
| 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 or 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 HMRC of the gross amount of any Gift Aid payments so that they can make sure you get all your available tax free allowances. |
Back to the top
The basics of the blind person's allowance (BPA) are described in our Low income workers section.
Importantly, you do not have to be entirely without sight to claim the BPA and although entitlement to the allowance is not dependent on age, we know that the likelihood of poor eyesight increases in older age and the BPA goes unclaimed by many who are entitled to it.
For those entitled to higher personal allowances because they are aged 65 or over or entitled to the married couple’s allowance because one spouse or civil partner was born before 6 April 1935, the interaction of all these different allowances can be confusing.
As noted in our basic guide, you can transfer any surplus BPA to your husband or wife or civil partner to reduce his or her tax. If you are claiming married couple's allowance, any surplus married couple's allowance must also be transferred at the same time.
| Patrick - transfer of BPA Patrick was born before 6 April 1935 and is married to Jan aged who is two years younger. His taxable income before allowances for 2012/13 was £6,500 and is less than his personal allowance. Patrick claims BPA and therefore £2,100 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). |
One further important point is that the BPA is not reduced where your income is over the threshold of £25,400 for higher age-related personal allowances as described above.
| Example – restricted age allowances, but full BPA remains Jimmy, a widower, is 80 and registered blind. His total income in 2012/13 is £31,000, so he is not entitled to the higher age-related allowance for someone aged 75 or over. His personal allowance is therefore reduced to the basic amount of £8,105. However, he can still claim the blind person’s allowance of £2,100 in full.
|
Back to the top
