What tax allowances am I entitled to?
Most tax allowances work by reducing your taxable income. As a result, 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 to. Note carefully that neither the married couple’s allowance nor the marriage allowance reduce your taxable income: instead they provide an amount (a tax credit) that can reduce the amount of income tax you pay.
Following the 2016 European Union (EU) membership referendum in the UK, on 29 March 2017 the UK provided notice to the European Council of its intention to withdraw from the EU under Article 50 of the Treaty on European Union. At the time of writing (in April 2019), the date and terms of the UK’s departure from the EU have not yet been finalised. Therefore, please note that the guidance below reflects the law as it applies before the UK’s departure from the EU.
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 a Welsh 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 a personal savings allowance and a dividend allowance, which are sometimes referred to as the savings nil rate and the dividend nil rate respectively. Despite their names, they do not work as tax allowances – in effect, they are nil rate bands of tax for specific types of income (that is, savings income and dividend income). We explain more about the personal 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 £12,500 for 2019/20.
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 2019/20 is £2,450. 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 GOV.UK.
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;
- 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 usually be more beneficial.
The marriage allowance for 2019/20 is £1,250 and it enables a spouse or civil partner who is not liable to income tax at a rate higher than the basic rate (or higher than the intermediate rate if a Scottish taxpayer) to transfer £1,250 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 (intermediate rate if a Scottish taxpayer). The maximum tax saving you can get as a couple from the marriage allowance is £250 for the 2019/20 tax year.
Note that the recipient spouse or civil partner does not receive an extra personal allowance of £1,250: instead they receive a tax credit of £250 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 2020 for the tax year 2019/20, 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 2020 for 2019/20, you would need to make another claim for 2020/21 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 2018/19 must be made by 5 April 2023. 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 our page Death of a spouse or civil partner. The first year that the marriage allowance was available 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 us assume a marriage allowance claim has been in place since 2015/16 and is continuing. If the election is withdrawn in August 2019, the marriage allowance transfer will continue for the tax year 2019/20, but then not be applied from 6 April 2020.
Warning: if you decide to transfer your marriage allowance to your spouse or civil partner you must transfer all of it (£1,250 in 2019/20). 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 (that is, more than £11,250 in 2019/20) and your spouse or civil partner’s income is less than 110% of the personal allowance (that is, less than £13,750 in 2019/20).
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.
In order to make an election for marriage allowance for a given tax year, it is necessary that you are married to, or in a civil partnership with, the same person (that is, the person who will be receiving the allowance) for:
- the whole or part of the tax year concerned; and
- at the point the election is made (or if the election is made after the death of one or both of the parties, then when they were both last living).
The marriage allowance is therefore available in full, if the conditions are otherwise met, for the year in which the marriage or civil partnership takes place.
Similarly, if you separate from your spouse or civil partner in a tax year, the marriage allowance is still available in full for that year if the conditions are otherwise met, but note that the election must have been made prior to the separation. The marriage allowance is not available for any tax year after your marriage has ended (by divorce) or your civil partnership has been dissolved. It is not possible to claim 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.
If an election is withdrawn, it usually has effect for the tax year after the one in which the notice was given. However, if the marriage or civil partnership comes to an end during the year in which the election is withdrawn, the marriage allowance is withdrawn for that year. So, if the election is withdrawn in August 2019 and the marriage or civil partnership comes to an end during the tax year 2019/20, then the allowance will not be available for 2019/20. 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 £1,250 (for 2019/20) of allowances. This is indicated by the addition of an ‘M’ to the tax code. Similarly, the individual giving up part of their allowance should have an ‘N’ after their primary tax code (if they have one).
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 2019/20 the maximum relief is £3,450 (this is the same as the married couple’s allowance for the year). This means you get a deduction of £345 from your tax liability.
If your maintenance payments are lower than £3,450, 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 the 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 £14,500 for 2019/20. She is not married, is UK resident and domiciled and has no other income.
Cheng's taxable income will be:
|Less: personal allowance||12,500|
|Cheng pays tax on||2,000|
Paul is married to Janet. Janet is employed and her salary is £19,450 for 2019/20.
Paul's income before allowances for 2019/20 is £6,000, which is much less than his personal allowance of £12,500.
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 £2,450 to Janet. This, together with her own personal allowance, reduces the income she has that is charged to tax for 2019/20. They can also claim the marriage allowance, so Janet gets £1,250 of Paul’s personal allowance – this gives her a tax credit of £250 to set against her tax payable.
Janet's taxable income for 2019/20 is therefore:
|Less: Janet's personal allowance||12,500|
|Less: Transfer of Paul's BPA||2,450|
|Janet pays tax on||4,500|
|Her tax bill is therefore:|
|£4,500 x 20%
Minus marriage allowance tax credit
Note – If Janet is not able to use all of the £250 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 £9,000 for 2019/20.
Carl works full-time and his salary is £21,500 in 2019/20.
Marjorie and Carl are both eligible for the full personal allowance of £12,500. As Marjorie’s income is only £9,000, she is not using £3,500 of her personal allowance.
Under the rules for the marriage allowance, Marjorie can choose to transfer £1,250 of her unused personal allowance to Carl.
Carl’s tax for 2019/20 is therefore calculated as follows:
|Income tax due (at 20%)||1,800|
|Marriage allowance tax credit||250|
|Final tax liability||1,550|
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 £11,900. Andrew normally works full time, but in 2019/20 he takes some unpaid leave and his salary for the year is £12,950.
If John keeps his full personal allowance his tax bill is £0 (£11,900 is less than £12,500) whilst Andrew’s is £90 (£12,950 - £12,500 = £450 at 20%). So, as a couple, their total tax bill is £90.
If John transfers £1,250 of his personal allowance to Andrew then his tax bill will increase to £130 (£11,900 - £11,250 = £650 at 20%) whilst Andrew’s will reduce to £0 (£90 original liability less tax credit £250; balance of tax credit is not repayable), making their total tax bill £130. They have paid £40 more tax as a couple by John transferring the marriage allowance than they would have done if John had not made the transfer.