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 born before 6 April 1948 are reduced if your net income for working out your tax is over £25,400 for 2013/14.
We also note some further points about blind person’s allowance in situations whether other allowances are available for older people.
For some pensioners, the 2013/14 year brings substantial changes to their allowances and this particularly affects people coming up to age 65. We cover this in more detail at the time, but a summary of the proposed changes is provided below.
You can get more information using the links below:
Personal allowances
How does higher income reduce my personal allowances?
Blind person's allowance
Changes to the higher personal allowance for 2013/14 and later years
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 £9,440 for 2013/14 if you were born after 5 April 1948. The allowance is increased if you were born before 6 April 1948. The exact amount you will get depends on your date of birth and income level. See below for more about how the rules have changed from previous years for 2013/14 onwards.
For those born on or before 6 April 1938 up to and including 5 April 1948 the full personal allowance (also called age allowance or higher personal allowance) is £10,500 for 2013/14, rising to £10,660 for someone born before 6 April 1938. 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, born in 1943, has taxable income of £12,000 for 2013/14. 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.
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If your taxable income before any allowances is more than £26,100 (for 2013/14) the situation gets more complicated.
When we talk about "income" in this section we mean your income before allowances so the figure of £26,100 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%. It can also similarly be reduced for any personal contributions you make to pension schemes.
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, born in 1930, has income for 2013/14 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 £26,100. |
You can only keep some of the higher personal allowance if your taxable income is below set levels. If your income for 2013/14 is over £28,220 for someone born between 6 April 1938 and 5 April 1948 (over £28,540 for someone born before 6 April 1938), your personal allowance will be the basic allowance that everyone gets of £9,440.
| Mick - income over limit for age allowance Mick, born in 1944, received taxable income of £31,500 for 2013/14. His personal allowance will be the basic allowance of £9,440. |
If your income falls between £26,100 and either £28,220 or £28,540 for 2013/14, your age allowance of £10,500 or £10,660 will be reduced but never below the basic allowance of £9,440
If your income is over £100,000 your basic personal allowance of £9,440 will be reduced by £1 for each £2 of income until there is no allowance left.
| Joe - working out reduction in age allowance Joe, born in 1934, received taxable income of £27,400 for 2013/14. He will therefore receive more than the basic allowance of £9,440 but less than the full age allowance of £10,660. 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 £27,000. From this figure deduct £26,100, giving you the amount that you have exceeded the limit. | | | £ | | Income before allowances | | | 27,400 | | Limit | | | 26,100 | | Difference | | | £1,300 | Divide the difference worked out above by 2. | Amount over limit | | 1,300 | | Divided by 2 | | 650 | 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 was born before 6 April 1938) | | | 10,660 | | Less: reduction worked out above | | | 650 | | Allowance Joe receives | | | £10,010 | If Joe had been born between 6 April 1938 and 5 April 1948, the situation would have been exactly the same except that the starting point for the calculation would be a full allowance of £10,500 instead of £10,660. |
| Tax Tip In 2013/14 if your taxable income before allowances falls within the band £26,100 to £28,220(£28,540 for those born before 6 April 1938) 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 were born before 6 April 1948, 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. |
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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 were born before 6 April 1948 or are 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 2013/14 was £6,500 and is less than his personal allowance. Patrick claims BPA and therefore £2,160 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 £26,100 for higher age-related personal allowances as described above.
| Example – restricted age allowances, but full BPA remains Jimmy, a widower, was born in 1933 and is registered blind. His total income in 2013/14 is £31,000, so he is not entitled to the higher age-related allowance for born before 6 April 1938. His personal allowance is therefore reduced to the basic amount of £9,440. However, he can still claim the blind person’s allowance of £2,160 in full.
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In tax years up to and including 2012/13, higher personal allowances were available to those aged 65 or over, from the tax year in which they turned 65. In the 2012 Budget, the Government announced changes which seek to phase out the higher personal allowances by reference to age, restricting them with effect from 2013/14 (tax year starting 6 April 2013) as follows:
- people born after 5 April 1938 but before 6 April 1948 are entitled to a personal allowance of £10,500; and
- people born before 6 April 1938 are entitled to a personal allowance of £10,660.
For anyone turning 65 from 6 April 2013 onwards, there is no entitlement to personal allowances. The existing higher age allowances noted above are also to be frozen at their above levels and will be effectively withdrawn altogether once the basic personal allowance catches up to, or overtakes, them.
In the 2013 Budget, it was announced that the 2014/15 basic personal allowance will be increased to £10,000 (from £9,440 in 2013/14). So the gap between the basic allowance and the remaining higher age allowances above is getting smaller.
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