What tax allowances am I entitled to?
Most tax allowances work by reducing your taxable income. This means they reduce the amount of income tax you pay. Most people can have a certain amount of taxable income each year, tax free. We explain the various tax allowances that you may be entitled. Note carefully that both the married couple’s allowance and the marriage allowance do not reduce your taxable income: instead they provide an amount (a tax credit) that can reduce the amount of income tax you pay.
You only pay income tax on taxable income that is above your tax allowances.
You are only eligible for UK tax allowances if you are resident in the United Kingdom or if you are a citizen of an EEA country. In addition, you may be able to claim a UK personal allowance under the terms of a doulbe taxation agreement. There is more information in the guidance to form R43 on the GOV.UK website.
If you are resident in the UK but not domiciled in the UK and you claim to use the ‘remittance basis’ of taxation, you may not be eligible for UK tax allowances. More information on residence and domicile can be found in our 'migrants section'.
From 6 April 2016 there is a personal savings allowance and a dividend allowance. These do not work as tax allowances – in effect, they are nil rate bands of tax for specific types of income (savings income and dividends). We look at the savings allowance and dividend allowance when we look at tax rates.
The personal allowance is a tax allowance that is available to most people who are resident in the UK. It reduces the amount of taxable income on which you pay tax.
The basic personal allowance is £11,000 for 2016/17.
Before 6 April 2016 you may have been able to claim a higher personal allowance if you were born before 6 April 1938.
The personal allowance can be reduced if your taxable income is over £100,000, but we aim this guidance at low-income taxpayers so do not cover those issues here.
You can see how allowances work to reduce the income you pay tax on in the example Cheng.
The age-related allowance does not apply to tax years starting 6 April 2016 onwards.
The age-related personal allowance was a tax allowance available to people who were born before 6 April 1938 for tax years up to and including 2015/16. It reduced the amount of taxable income on which you paid tax.
The age-related personal allowance was available instead of the basic personal allowance for tax years up to and including 2015/16; people born before 6 April 1938 did not receive both the personal allowance and the age-related allowance.
The maximum age-related allowance for 2015/16 was £10,660 for people born before 6 April 1938.
There is more information on age-related allowances in the ‘pensioners and tax’ section.
Blind person's allowance (BPA) reduces the amount of taxable income that you have to pay tax on. If you are eligible for BPA, you are entitled to it in addition to the personal allowance.
The BPA for 2016/17 is £2,290. If you do not have enough income to use any or all of the BPA yourself, you can claim to transfer it in full (or whatever is left of it) to your spouse or civil partner.
If you are entitled to BPA, you must tell HM Revenue & Customs (HMRC) about it. You can find out how to contact them about BPA on the GOV.UK website.
You do not have to be entirely without sight to claim the BPA, but you do have to meet one of the following criteria:
- You can claim if you are registered as blind with a local authority in England and Wales; or
- If you live in Scotland or Northern Ireland, your sight must be so bad as to stop you performing any work for which eyesight is essential.
Entitlement to BPA does not depend on your age.
The amount of BPA to which you are entitled does not depend on your level of income. The BPA is not reduced where your income is more than a certain amount.
If both you and your spouse or civil partner are entitled to claim BPA you can each claim it independently.
The English and Welsh system in more detail
An eye specialist can 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 HMRC as soon as possible and tell them that you want to claim BPA.
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.
The married couple's allowance (MCA) does not reduce the amount of taxable income on which you pay tax. It is used to calculate an amount to reduce your tax bill instead.
You are only entitled to MCA if you are married or in a civil partnership and at least one of you was born before 6 April 1935.
There is more information including examples in the 'pensioners section' of this website.
Maintenance payments relief does not reduce the amount of taxable income on which you pay tax. It is used to calculate an amount to reduce your tax bill instead.
Maintenance payments relief is being phased out. You are only entitled to the relief if you meet all of the following conditions:
- You are separated or divorced or your civil partnership has been dissolved.
- You, or your ex-spouse or former civil partner, were born before 6 April 1935.
- You are making maintenance payments by Court Order.
- The maintenance payments are for the benefit of your ex-spouse or former civil partner or for your children under the age of 21.
- Your ex-spouse or former civil partner is not remarried or in a new civil partnership.
Maintenance payments relief works by deducting 10% of the relief from the tax due on your taxable income.
For 2016/17 the maximum relief is £3,220. This means you get a deduction of £322 from your tax liability.
If your maintenance payments are lower than £3,220, your deduction is 10% of the amount of maintenance you pay.
We are often asked if married couples or civil partners can transfer their tax allowances to their spouse or partner if they do not use them. Some allowances are transferable, but others are not.
Marriage allowance or transferable tax allowance
You can only transfer some of the personal allowance to your spouse or civil partner, if you meet certain conditions. This is known as the transferable tax allowance for married couples and civil partners or "marriage allowance". Note that this is not an extra allowance – it is part of the personal allowance.
The marriage allowance is only available to spouses and civil partners born after 5 April 1935.The allowance for 2016/17 is £1,100. Under the rules, a spouse or civil partner who is not liable to income tax at a rate higher than the basic rate may transfer £1,100 of their personal allowance to their spouse or civil partner. The recipient spouse or civil partner must not be liable to income tax above the basic rate. The maximum saving to be achieved is £220 for the year. Note carefully that the recipient spouse or civil partner does not receive an extra personal allowance of £1,100: instead they receive a tax credit of £220 that can be set against their tax liability. If the full tax credit cannot be used by the recipient spouse, the balance will not be repaid.
You can see how the marriage allowance works in the example Marjorie.
The claim continues from the tax year in which it is made until either you withdraw it or the recipient spouse or civil partner does not obtain a tax advantage. Separation also affects the claim.
Warning: if you decide to transfer your marriage allowance to your spouse or civil partner you must transfer all of it (£1,100 in 2016/17). In some cases this could increase your total tax bill as a couple and leave you worse off overall. This will happen if your income is more than 90% of the personal allowance (so more than £9,900 in 2016/17) and your spouse or civil partner’s income is less than 110% of the personal allowance (so less than £12,100 in 2016/17).
You can see how this can happen in the example John.
You can claim the marriage allowance after the end of the tax year. If your incomes are variable, it may be better to wait until you are certain before making the application to transfer.
If you make a claim after the end of the tax year, it will only have effect for the tax year to which the claim relates; so if you make a claim after 5 April 2017 for 2016/17, you would need to make another claim in respect of 2017/18 if appropriate.
The claim can be made up to four years from the end of the relevant tax year. In other words a claim for marriage allowance for the tax year 2015/16 must be made by 5 April 2020. Note, though, that the claim can only be made if both parties to the marriage or civl partnership are still alive.
Blind person's allowance (BPA)
You can transfer the BPA to your spouse or civil partner, if your income is too low to make use of it. Your surplus BPA can then reduce their taxable income for tax purposes. If you are a non-taxpayer and your spouse or civil partner pays tax you can still transfer your BPA to them.
You can transfer the BPA by contacting HMRC.
You can see how transferring surplus BPA works in the example Paul.
Married couple's allowance (MCA)
You can transfer the MCA to your spouse or civil partner, if your income is too low to make use of it. We give the full rules in our 'pensioner section'.
If you are claiming both BPA and MCA you cannot transfer one allowance and not the other. You must transfer both allowances together. There is more information including an example in the 'pensioners section' of this website.
Separation affects your MCA and may mean you become entitled to maintenance payments relief. As noted above, both of these allowances apply only if either you or your spouse or civil partner was born before 6 April 1935.
Separation also affects the marriage allowance.
HMRC will treat you as living together if you are separated due to circumstances beyond your control, for example, if one of you is taken into a nursing home or hospitalised long term.
For income tax purposes you are treated as living with your spouse or civil partner unless you are separated:
- under an order of a Court, or
- by a formal deed of separation executed under seal, except in Scotland, where the deed should be witnessed, or
- in such circumstances that the separation is likely to be permanent.
You can get marriage allowance in full in the year that you separate – an election remains in place in the tax year of separation, unless the transferor revokes their claim.
In the year after the tax year of separation, it is not possible to make a claim for marriage allowance.
Married couple’s allowance
You can get MCA in full in the year that you separate.
If you and your spouse or civil partner are later reconciled the allowance is available for the tax year of reconciliation. If this is also the year in which you separated, the allowance is given without any break.
Full maintenance payments relief is available in the year of separation, but relief is not available after the spouse or civil partner remarries or registers a new civil partnership.
Cheng has taxable income before allowances of £13,500 for 2016/17. She is not married, is UK resident and domiciled and has no other income.
Cheng's taxable income will be:
|Less: personal allowance||11,000|
|Cheng pays tax on||2,500|
Paul is married to Janet. Janet works and her salary is £14,690 for 2016/17.
Paul's income before allowances for 2016/17 is £5,000, which is much less than his personal allowance of £11,000.
Paul is eligible for and claims BPA, but the allowance is wholly surplus to his needs. He therefore claims to transfer the whole amount of £2,290 to Janet.
This, together with her own personal allowance, reduces the income she has that is charged to tax for 2016/17. They can also claim the marriage allowance, so Janet gets £1,100 of Paul's personal allowance.
Janet's taxable income for 2016/17 is therefore:
|Less: Janet's personal allowance||11,000|
|Less: Marriage allowance||1,100|
|Less: Transfer of Paul's BPA||2,290|
|Janet pays tax on||300|
Marjorie is married to Carl. Marjorie works part-time and her salary is £8,000 for 2016/17.
Carl works full-time and his salary is £21,000 in 2016/17.
Marjorie and Carl are both eligible for the full personal allowance of £11,000. As Marjorie’s income is only £8,000, she is not using £3,000 of her personal allowance.
Under the rules for the marriage allowance, Marjorie can choose to transfer £1,100 of her unused personal allowance to Carl.
Carl’s tax for 2016/17 is therefore calculated as follows:
|Income tax due||2,000|
|Marriage allowance tax credit||220|
|Final tax liability||1,780|
John and Andrew, both born in 1960, are civil partners. John works part-time and his salary is £10,500. Andrew normally works full time, but in 2016/17 he takes some unpaid leave and his salary for the year is £11,250.
If John keeps his full personal allowance his tax bill is £0 (£10,500 is less than £11,000) whilst Andrew’s is £50 (£11,250 – £11,000 = £250 at 20%). So, as a couple, their total tax bill is £50.
If John transfers £1,100 of his personal allowance to Andrew then his tax bill will increase to £120 (£10,500 – £9,900 = £600 at 20%) whilst Andrew’s will reduce to £0 (£50 original liability less tax credit £220; balance of tax credit is not repayable), making their total tax bill £120. They have paid £70 more tax as a couple by John transferring the marriage allowance than they would have done if John had not made the transfer.