Tax and allowances for older people Age-related tax allowances

Take full advantage of age-related allowances

If you are aged 65 or over you may be able to take advantage of increased tax-free allowances.

Everyone who earns under £100,000 has the same basic tax allowance (the amount of income you are allowed to receive each year before you pay tax), irrespective of their age.

For 2011-12 this was £7,475. For 2012-13 it is £8,105. Once you turn 65, your allowance could increase substantially above the basic amount. If you qualify, you receive the increased allowance for the whole of the tax year in which you have your 65th birthday, regardless of when this is. If it is in February, for example, your new allowance applies from the preceding April onwards.   

If you're aged between 65 and 74 and your income is below a certain limit, your tax free allowance during 2011-12 was £9,940. For 2012-13 it's £10,500. If you're 75 or over, it was £10,090. For 2012-13 this rises to £10,660. These higher allowances are income-dependant, however, so not everyone over 65 is able to claim them.

Personal income limits

If your income was £24,000 or less during the 2011-12 tax year (£25,400 or less in 2012-13) you'll receive the full age-related allowance, but above this limit you start to lose the higher allowance at the rate of £1 for every £2 that your income exceeds £24,000 (£25,400 in 2012-13). If your income is above £100,000 you will also lose basic personal allowance, irrespective of age. Above £114,950 (£116,210 in 2012-13) you receive no tax-free allowance.

Example

So, for example, a 65 year-old with a total income of £26,000 (£600 over the limit in 2012-13) will lose £300 from the higher allowance, bringing it down to £10,200.

If your income is too high you won't receive any age-related extra allowance, but will still get the basic allowance (£7,475 for 2011-12, £8,105 for 2012-13).

Upper and lower limits

The table below shows the lower and upper earning limits between which you will receive part of the age-related higher personal allowance. 

• If your income is below the lower limits shown you will receive the full age-related personal allowance. 
• If it falls within the lower and upper limits, then you will receive some higher age-related personal allowance, but not the full amount. 
• Above the upper limit, you get no additional age-related allowance.

National Insurance

As well as becoming eligible for extra tax-free allowance from age 65 onwards, when you reach state pension age (previously 60 for women and 65 for men, but changing from 2010 onwards to reach 65 for both men and women by 2018), you no longer have to pay National Insurance contributions. 

If you continue working after state pension age

If you continue working after state pension age, to stop NI being deducted you’ll need to prove your age to your employer, either by producing a document (such as a birth certificate or passport) or giving them a certificate of age exemption (CA4140/CF384).

You should be sent one automatically if you say you will carry on working on your state pension claim form. 

Alternatively, write to: 

HM Revenue and Customs

National Insurance Contributions Office

Contributor Caseworker

Longbenton, 

Newcastle upon Tyne, NE98 1ZZ

If you are self-employed

If you are self-employed, tick the relevant box on the self-employment pages of the tax return to claim exemption from Class 4 National Insurance contributions. Class 2 weekly self-employment contributions should cease automatically, from the Saturday following the date on which you reach state retirement age, but you should check your statements from HMRC to make sure.

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