Each Budget, the Chancellor of the Exchequer makes changes to the tax free allowances of every taxpayer in the UK. The tax allowances changed again at the start of the 2011/12 tax year and every taxpayer should know exactly what allowances they have.
Our guide outlines the main tax allowances for the 2011/12 tax year.
Each taxpayer in the UK has a personal allowance. This is the amount of money that you’re entitled to earn each tax year before you pay any tax. It generally rises every year although there was a significant rise in the personal allowance for the tax year 2011/12.
If you are over the age of 65 you may receive an additional personal allowance.
The three levels of Personal Allowance in the 2011/12 tax year are:
- Basic – £7,475 (with an income limit of £100,000) – up from £6,475 in tax year 2010/11
- Age 65-74 – £9,940 (with an income limit of £24,000) – up from £9,490 in tax year 2010/11
- Age 75 and over – £10,090 (with an income limit of £24,000) – up from £9,640 in tax year 2010/11
If you become 65 or 75 during the year to 5 April 2012, you are entitled to the full allowance for that age group.
If you are aged 65 and over and your income is between £24,000 and £100,000, your age-related Personal Allowance is reduced by half of the amount – £1 for every £2 – you have over the £24,000 limit, until the basic allowance is reached. For example, if you’re 68 and have income of £25,000 – £1,000 over the limit – your age-related Personal Allowance is reduced by £500 to £9,440.
From the tax year 2010-11, if your income is over £100,000, your Personal Allowance is reduced by half of the amount – £1 for every £2 – you have over that limit. If your income is large enough, your Personal Allowance will be reduced to nil.
Blind Persons allowance
If you are registered blind with your local authority, your Blind Person’s Allowance is added onto your Personal Allowance to work out the amount that you can earn without paying tax.
In the 2011/12 tax year, Blind Person’s Allowance for the tax year is £1,980 irrespective of your age or income.
So, if you are under 65 and claim both allowances, you can earn £9,455 (£7,475 Personal Allowance plus £1,980 Blind Person’s Allowance) before you pay any tax.
Married Couples Allowance
You can claim Married Couple’s Allowance if you’re a taxpayer, you’re married or in a civil partnership and you or your spouse or civil partner were born before 6 April 1935.
The maximum amount of Married Couple’s Allowance for the 2011/12 tax year is £7,295 and the minimum amount is £2,800.
You receive 10 per cent of the allowance amount – which means your tax saving (based on a full year’s eligibility) is at least £280 and up to £729.50. The actual amount depends on your personal income.