Income tax allowances and amounts - In Wales

This information applies to England, Wales, Scotland and Northern Ireland

What are allowances against income tax

An income tax allowance is a fixed amount that is set against your income, allowing you to receive that much income free of tax in any one tax year. In the case of the married couple's allowance, the allowance works as a deduction from your tax bill. You may be entitled to receive more than one allowance. This information gives details of the different types of allowances and when they can be claimed.

All taxpayers can claim at least one tax allowance and some taxpayers can claim more than one. The allowances are given to all taxpayers whether they are employees, self-employed or do not work. If you are entitled to an allowance and are not getting it, you should claim it from your tax office. If you have not received allowances to which you are entitled, you can make a backdated claim for them for up to six years.

In practice, if you receive earnings or an occupational pension, this income is taxed through the Pay As You Earn (PAYE) system. This means your allowances are spread over the year and you pay your tax throughout the year, not just when your income reaches the amounts of your allowances.

For more details about PAYE, seeThe Pay As You Earn (PAYE) system.

In addition to claiming tax allowances, you may:

• be able to claim tax reliefs. Tax reliefs are given on some outgoings. This means you do not pay income tax on the amount you spend on these outgoings

For more details about tax reliefs, see Tax reliefs (excluding self-employed people)

• have other-tax free income. Some types of income are exempt from tax

For details of tax-exempt income, see Tax-exempt and taxable income.

Back to top

What allowances are available

The following tax allowances can be given:

• personal allowance - see under heading Personal allowance
• blind person’s allowance - see under heading Blind person’s allowance
• married couple’s allowance for couples where at least one member was born before 6 April 1935 - see under heading Married couple’s allowance.

Back to top

Personal allowance

Everyone automatically gets a personal tax allowance, whether they are male or female, married, in a civil partnership or single and regardless of how young they are. This can be set against all types of income. There are three amounts of personal allowance:

• a standard amount for people aged under 65
• a higher amount for people aged 65 to 74
• the highest amount for people aged 75 or over.

If you have income over a certain limit, the higher amounts for people aged 65 or over are reduced. However, they are never reduced below the standard amount for people under 65.

You may also be entitled to:

• blind person’s allowance – see under heading Blind person's allowance
• married couple's allowance – see under heading Married couple's allowance.

Personal allowance amounts 2008/9 tax year

This table gives details of personal tax allowances from 6 April 2008 to 5 April 2009. These allowances are deducted from total income before the amount of tax payable is calculated.

*The personal allowance for everyone aged under 65 has been changed since the beginning of the tax year. However the change was not implemented until September 2008 when it was backdated to 6 April 2008. For people who are basic rate taxpayers, the change means a tax rebate of £60 in your September pay packet, followed by a £10 reduction in the tax you have to pay each month until 5 April 2009.

For more information about this change, visit the website of HM Revenue and Customs at: www.hmrc.gov.uk.

The personal allowance is taken off at your highest rate of tax.

If you are aged 65 or over, your personal allowance will be reduced if you have income of over £21,800 but it will not be reduced below the standard amount for people under 65.

For income limits in previous tax years, see under heading Allowances for previous tax years.

Back to top

Married couple’s allowance

To claim married couple's allowance (MCA), you must be living together as a married couple or as civil partners and at least one of you must have been born before 6 April 1935. You will be treated as living together unless you have separated in such circumstances that the separation is likely to be permanent.

The rules about MCA depend on the date that the couple married or entered into a civil partnership, as well as the age of the older partner.

If the couple married before 5 December 2005, the MCA is given to the husband (unless the couple choose a different arrangement) and the amount depends on the husband's income and the age of the older partner.

If the couple married or entered into a civil partnership on or after 5 December 2005, the MCA is given to the partner with the higher income. The amount of MCA depends on the age of the older partner and the income of the partner with the higher income.

You will be entitled to a personal allowance in addition to the married couple’s allowance, and may also be entitled to a blind person’s allowance.

Married couple’s allowance amounts 2008/2009 tax year

MCA is an amount that is taken off your tax bill, so you can only claim it if you pay tax. Your tax bill is reduced by 10% of the MCA to which you are entitled. The minimum amount of MCA you can get is 10% of £2,540 (£254). The maximum amount you can get is 10% of £6,535 (£653.50) if you're under 75 or 10% of £6,625 if you're 75 or over.

Your MCA will be reduced if you have income of over £21,800 but it will not be reduced below the minimum amount – see under heading Income limits on tax allowances.

Back to top

Income limits on tax allowances

The higher tax allowance given to you if you are aged 65 or over is reduced if your total income is more than a certain limit. This limit is £21,800 for the tax year 2008/09.

Married couple's allowance can also be reduced if your income is more than £21,800. If you were married before 5 December 2005, it will be your husband's income which is counted. If you were married or entered into a civil partnership on or after this date, it will be the income of the partner who earns the most which is counted.

If income is over the income limit, the allowance is reduced by £1 for every £2 that the income is over the limit. If the amount of income is so large that the allowance would be reduced to the same amount as, or below, the amount of the basic personal or married couple's allowance, you will only get the minimum personal or married couple's allowance.

When calculating whether your income is more than the income limit, any income which is exempt from tax should not be included. Special rules apply to income from which tax has already been deducted. The most common example of this is where tax has been deducted from bank or building society interest before the payments are made to you.

If you need further information about this, you should consult an experienced adviser for example, at a Citizens Advice Bureau. To search for details of your nearest CAB, including those that can give advice by e-mail, click on nearest CAB.

For details of tax-exempt, income see Tax-exempt and taxable income.

Back to top

Blind person’s allowance

You can claim a blind person’s allowance for the whole tax year if you are a registered blind person or become a registered blind person during the tax year. You can claim this in addition to your personal allowance or married couple's allowance, if you're entitled to one.

If you are married or in a civil partnership and cannot use all your blind person’s allowance because you do not have enough income, you can ask your tax office to transfer the unused part of the allowance to your married partner or civil partner, whether or not the partner is blind. If both you and your partner are blind, you can each receive the allowance.

The blind person's allowance is deducted from taxable income before the amount of tax payable is calculated.

The allowance is taken off at your highest rate of tax.

Back to top

Allowance amounts for previous tax years

This chart gives details of personal tax allowances for the previous six tax years. You may also have been entitled to blind person’s allowance.

If you need advice about personal allowances for previous tax years, you should consult an experienced adviser, for example, a Citizens Advice Bureau. To search for details of your nearest CAB, including those that can give advice by e-mail, click on nearest CAB.

Back to top