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 (including if you are a Scottish taxpayer) 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 double 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.
There is also personal savings allowance and a dividend allowance, which are sometimes referred to as the savings nil rate and the dividend nil rate. 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 £11,850 for 2018/19.
If your income is below your personal allowance, meaning you do not make full use of your personal allowance, you lose the unused part. You cannot carry any unused personal allowance backwards or forwards to a different tax year.
The personal allowance is reduced if your taxable income is over £100,000, but we aim this guidance at low-income taxpayers so do not cover this issue here.
You can use your personal allowance to reduce your taxable income in the way which will minimise your tax liability. It is usually best to use your personal allowance against earned income or non-savings income first, but this is not always the case.
You can see how allowances work to reduce the income you pay tax on in the example Cheng.
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 2018/19 is £2,390. 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.
This allowance is also known as the transferable tax allowance for married couples and civil partners. It should not be confused with the married couple’s allowance.
You can transfer some of your personal allowance to your spouse or civil partner, if you both meet certain conditions.
The marriage allowance is available to all spouses and civil partners. However, if one of you was born before 6 April 1935, you should claim the married couple’s allowance instead as it will be more beneficial.
The marriage allowance for 2018/19 is £1,190 and it enables a spouse or civil partner who is not liable to income tax at a rate higher than the basic rate to transfer £1,190 of their personal allowance to their spouse or civil partner. The recipient spouse or civil partner also must not be liable to income tax above the basic rate. The maximum tax saving you can get as a couple from the marriage allowance is £238 for the year.
Note that the recipient spouse or civil partner does not receive an extra personal allowance of £1,190: instead they receive a tax credit of £238 that can be set against their tax liability. If the full tax credit cannot be used by the recipient, the balance will not be repaid.
You can apply for marriage allowance online on the GOV.UK website. If you cannot claim online, you can telephone HMRC on 0300 200 3300 to make the claim or use our marriage allowance template letter to make the claim.
You can see how the marriage allowance works in the example Marjorie.
If you make the claim before 6 April 2019 for the tax year 2018/19, the claim continues until either you withdraw it or the recipient spouse or civil partner does not obtain a tax advantage. On the other hand, if you make the claim after the end of the relevant 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 2019 for 2018/19, you would need to make another claim for 2019/20 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 2017/18 must be made by 5 April 2022. Since 29 November 2017, it has been possible to make a claim even if one of the parties to the marriage or civil partnership is no longer alive – for more information, see Death of a spouse or civil partner. The first year that the marriage allowance was able to be claimed was 2015/16. Any claims for that year must be made by 5 April 2020.
If you wish to withdraw the claim, for example because it is no longer beneficial, you should note that only the individual who originally made the claim (by allowing their personal allowance to be reduced) may withdraw the election. The withdrawal of the election then only takes place from the start of the following tax year. For example, let’s assume a marriage allowance claim has been in place since 2015/16 and is continuing. If the election is withdrawn in August 2018, the marriage allowance transfer will continue for the tax year 2018/19, but then not be applied from 6 April 2019.
Warning: if you decide to transfer your marriage allowance to your spouse or civil partner you must transfer all of it (£1,190 in 2018/19). In some cases, this could increase your total tax bill as a couple and leave you worse off overall. This may happen if your income is more than 90% of the personal allowance (so more than £10,665 in 2018/19) and your spouse or civil partner’s income is less than 110% of the personal allowance (so less than £13,035 in 2018/19).
You can see how this can happen in the example John.
If your incomes are variable, it may be better to wait until you are certain before making the application to transfer.
If you are separated from your spouse or civil partner, the marriage allowance may still be claimed, but you cannot take advantage of the marriage allowance for any tax year after your marriage has ended (by divorce) or your civil partnership has been dissolved. Also, although it is possible to claim the marriage allowance after the end of the relevant tax year, you cannot make a claim for the marriage allowance after you are divorced or your civil partnership is dissolved, even if the claim would be for a time when you were still married or in a civil partnership.
However, if the marriage or civil partnership comes to an end during the year when the election is withdrawn, the marriage allowance is withdrawn immediately. So, if the election is withdrawn in August 2018 and the marriage or civil partnership comes to an end during the tax year 2018/19, then the allowance will not be available for 2018/19. For this purpose (withdrawing the claim for marriage allowance), the marriage or civil partnership is deemed to come to an end at divorce, dissolution of civil partnership or if there is a formal separation agreement.
Note that if the recipient spouse or civil partner is in employment or is paid a pension (other than the state pension) their PAYE code may be amended as if they received an extra £1,190 (for 2018/19) of allowances. In most cases this will provide the correct result in the hands of the recipient.
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 on the MCA, including examples, in the pensioners section.
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 2018/19 the maximum relief is £3,360. This means you get a deduction of £336 from your tax liability.
If your maintenance payments are lower than £3,360, 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 read about this in the section above.
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 pensioners 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.
Married couple’s allowance and maintenance payments relief
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.
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 MCA and maintenance payments relief 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.
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.
Marriage allowance is available where an election is made and the two individuals concerned are married or in a civil partnership for the whole or part of the tax year concerned. This means that marriage allowance is still available if you are separated from your spouse or civil partner.
You can get marriage allowance in full in the year that your marriage or civil partnership ends – an election remains in place in the tax year of the end of the marriage or civil partnership, unless the transferor revokes their claim.
For the purposes of marriage allowance, a marriage comes to an end if any of the following are made:
- decree absolute of divorce (decree of divorce in Scotland)
- decree of nullity (declarator of nullity in Scotland)
A civil partnership comes to an end if any of the following are made:
- dissolution order or nullity order, which has been made final (decree of dissolution or a declarator of nullity in Scotland)
What are trading and property allowances?
From 6 April 2017, there are two new allowances available to individuals: the ‘trading allowance’ and the ‘property allowance’. Each allowance is £1,000.
Cheng has taxable income before allowances of £13,850 for 2018/19. She is not married, is UK resident and domiciled and has no other income.
Cheng's taxable income will be:
|Less: personal allowance||11,850|
|Cheng pays tax on||2,000|
Paul is married to Janet. Janet is employed and her salary is £18,690 for 2018/19.
Paul's income before allowances for 2018/19 is £6,000, which is much less than his personal allowance of £11,850.
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 £2,390 to Janet. This, together with her own personal allowance, reduces the income she has that is charged to tax for 2018/19. They can also claim the marriage allowance, so Janet gets £1,190 of Paul’s personal allowance – this gives her a tax credit of £238 to set against her tax payable.
Janet's taxable income for 2018/19 is therefore:
|Less: Janet's personal allowance||11,850|
|Less: Transfer of Paul's BPA||2,390|
|Janet pays tax on||4,450|
|Her tax bill is therefore:|
|£4,450 x 20%
Minus marriage allowance tax credit
Note – If Janet is not able to use all of the £238 tax credit that the marriage allowance gives her, it is lost, or wasted.
This example uses UK income tax rates and bands; the position may be different if you are a Scottish taxpayer.
Marjorie is married to Carl. Marjorie works part-time and her salary is £8,000 for 2018/19.
Carl works full-time and his salary is £21,000 in 2018/19.
Marjorie and Carl are both eligible for the full personal allowance of £11,850. As Marjorie’s income is only £8,000, she is not using £3,850 of her personal allowance.
Under the rules for the marriage allowance, Marjorie can choose to transfer £1,190 of her unused personal allowance to Carl.
Carl’s tax for 2018/19 is therefore calculated as follows:
|Income tax due||1,830|
|Marriage allowance tax credit||238|
|Final tax liability||1,592|
This example uses UK income tax rates and bands; the position may be different if you are a Scottish taxpayer.
John and Andrew, both born in 1960, are civil partners. John works part-time and his salary is £11,300. Andrew normally works full time, but in 2018/19 he takes some unpaid leave and his salary for the year is £12,250.
If John keeps his full personal allowance his tax bill is £0 (£11,300 is less than £11,850) whilst Andrew’s is £80 (£12,250 - £11,850 = £400 at 20%). So, as a couple, their total tax bill is £80.
If John transfers £1,190 of his personal allowance to Andrew then his tax bill will increase to £128 (£11,300 - £10,660 = £640 at 20%) whilst Andrew’s will reduce to £0 (£80 original liability less tax credit £238; balance of tax credit is not repayable), making their total tax bill £128. They have paid £48 more tax as a couple by John transferring the marriage allowance than they would have done if John had not made the transfer.