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Personal Allowances are given as a deduction from the taxpayers total income to arrive at their taxable income. The deduction cannot create negative income. Unused personal allowances are lost.
A higher age allowance is given for people aged 65-74 and higher again for 75+. The person will be entitled to a higher allowance if they reach 65 or 75 by the end of the tax year (5th April).
|
Basic |
Aged 65-74 |
Aged 75+ |
Income Limit |
2017-18 |
11,500 |
11,500 |
11,500 |
NA |
2016-17 |
11,000 |
11,000 |
11,000 |
NA |
2015-16 |
10,600 |
10,600 |
10,660 |
27,700 |
2014-15 |
10,000 |
10,500 |
10,660 |
27,000 |
2013-14 |
9,440 |
10,500 |
10,660 |
26,100 |
2012-13 |
8,105 |
10,500 |
10,660 |
25,400 |
2011-12 |
7,475 |
9,940 |
10,090 |
24,000 |
2010-11 |
6,475 |
9,490 |
9,640 |
22,900 |
2009-10 |
6,475 |
9,490 |
9,640 |
22,900 |
2008-09 |
6,035 |
9,030 |
9,180 |
21,800 |
2007-08 |
5,225 |
7,550 |
7,690 |
20,900 |
2006-07 |
5,035 |
7,280 |
7,420 |
20,100 |
2005-06 |
4,895 |
7,090 |
7,220 |
19,500 |
2004-05 |
4,745 |
6,830 |
6,950 |
18,900 |
2003-04 |
4,615 |
6,610 |
6,720 |
18,300 |
2002-03 |
4,615 |
6,100 |
6,370 |
17,900 |
2001-02 |
4,535 |
5,990 |
6,260 |
17,600 |
2000-01 |
4,385 |
5,790 |
6,050 |
17,000 |
1999-2000 |
4,335 |
5,720 |
5,980 |
16,800 |
1998-99 |
4,195 |
5,410 |
5,600 |
16,200 |
1997-98 |
4,045 |
5,220 |
5,400 |
15,600 |
1996-97 |
3,765 |
4,910 |
5,090 |
15,200 |
If the taxpayer has total income above the income limit the age related allowances are withdrawn by £1 for every £2 that the person's total income exceeds the income limit. For example, if the total income is £23,200 in 2009-10, a 70 year old taxpayer’s personal allowance will be reduced by £150 to £9,340 (£23,200 – £22,900/2 = £150).
Prior to 2011 the age related allowances cannot be reduced to less than the basic allowance, from 2011 onwards the basic allowance can be reduced by £1 for every £2 of income above the £100,000 limit. This reduction applies irrespective of age.
In this case the total income is not necessarily the same as the amount shown in the tax computation.
The tax computation will not show pension contributions made net (personal pension contributions made by an employee), free-standing additional voluntary contributions or vocational training. All these items will be shown as extending the basic rate tax band. These amounts must all be deducted from the total income before testing the income limit.
For example, if the taxpayer has total income of £24,000 and makes a net personal pension contribution of £3,200, the basic rate band extension will be £4,000 (3,200 x 100/80). In this case there would be no reduction to the age allowance because the total income would be just £19,000.
One deduction is ignored for the income limit test. Any death, sickness or superannuation benefits included in the deductions should be added back.
For example, if the client has total income of £18,000 that includes a benefit of £100. The total income will be £18,100 for the income limit test.