Most people in the UK are entitled to earn some income every year before they have to pay tax. This is called your Personal Allowance. Depending on your circumstances you may also be able to claim some other tax allowances.
Our guide looks at how much you can earn before paying tax in 2011. We also look at how much you can earn before you pay any National Insurance contributions.
How much can I earn before paying tax 2011?
The amount of your tax free Personal Allowance depends on your age and your total income in the last tax year.
The basic personal allowance for people aged under 65 and who earn under £100,000 in the 2011/12 tax year is £7,475. This means you can earn £7,475 before you pay tax.
If you are aged 65 to 74 and you earn under £24,000 your Personal Allowance is £9,940.
If you are aged 75 or over and you earn under £24,000 your Personal Allowance is £10,090.
If your income is over the limit (either £100,000 or £24,000 depending on your age) your Personal Allowance is reduced by half of the amount – £1 for every £2 – you have over that limit.
Other allowances that might increase the amount you can earn before paying tax in 2011
If you’re certified blind and are on a local authority register of blind persons you can claim Blind Person’s Allowance. Blind Person’s Allowance for the tax year 2011/12 is £1,980. This means that if you also qualify for the full Personal Allowance, you can earn £9,455 in the 2011/12 tax year before you pay tax.
If you are married or in a civil partnership and living together, you are a taxpayer and at least one spouse or partner was born before 6 April 1935 then you can claim Married Couple’s Allowance. In the 2011/12 tax year the maximum amount of Married Couple’s Allowance is £7,295 and the minimum amount is £2,800.
You receive ten per cent of the allowance amount – which means your annual tax saving is at least £280 and could be up to £729.50. The actual amount depends on your income.
How much can I earn before paying National Insurance contributions in 2011?
If you’re employed you pay Class 1 National Insurance contributions (NICs). In the 2011/12 tax year you won’t pay any NICs if you earn less than £139 per week.
If your average earnings are over £139 per week you won’t necessarily pay NICs every week. You only pay NICs in the weeks where your earnings exceed £139.
If you’re self-employed you pay Class 2 and Class 4 National Insurance contributions. IN the 2011/12 tax year you won’t pay any Class 4 NICs if your profits are under £7,225. In addition, you may not pay any Class 2 NICs (normally a flat rate of £2.50 per week) if your profits are expected to be under £5,315.