Tax rates, allowances and amounts Tax-free income and allowances
Allowances reduce the amount of tax you have to pay. There are two types:
- allowances that give full relief and allow you to earn a certain amount of money before paying tax, and
- allowances that give restricted relief, which reduce your tax bill by a tenth of their nominal value.
The table below provides a basic overview of these allowances. For a more thorough explanation, make sure to read our guides on capital gains tax, married couple's allowance and tax allowances for older people.
Go further: The Which? Tax Calculator- use our tax calculator to check your 2014 tax bill and this year's self-assessment return.
|Tax basics explained|
|Basic rate income tax (20%)||£0-£31,865 (after allowances)||£0-£31,785 (after allowances)|
|Higher rate income tax (40%)||Over £31,865||Over £31,785|
|Additional rate income tax (45%)||Over £150,000||Over £150,000|
|Personal allowance (tax-free)||£10,000 (unless income above £100,000)||£10,600 (unless income above £100,000)|
|Income limit above which you start to lose personal allowance (at rate of £1 for each £2 you earn above limit)||£100,000||£100,000|
|Age-related personal allowance (born before 6 April 1948 )||£10,500||N/A|
|Age-related personal allowance (born before 6 April 1938)||£10,660||£10,660|
|Lower earnings limit (above which you start to lose age-related allowance)||£27,000||£27,700|
|Upper earnings limit (above which you receive no age-related allowance, just basic personal allowance)||£28,000||£27,820|
|77+ Upper earnings limit (above which you receive no age-related allowance, just basic personal allowance)||£28,320||£27,820|
|Married couple’s allowance (MCA) -born after 6 April 1935||N/A||N/A|
|Married couple’s allowance (MCA) -born before 6 April 1935 only||£8,165||£8,355|
|Blind person's allowance||£2,230||£2,290|
|Capital gains tax (CGT) threshold||£11,000||£11,100|
|Inheritance tax threshold (IHT)||£325,000||£325,000|
Most people are allowed to receive a certain amount of income in a tax year before tax is payable. This is known as the basic personal allowance, and is classed as a 'full relief' allowance. In 2014-15 the basic personal allowance for people under 65 is £10,000. In 2013-14 it was £9,440. If you earn above £100,000 it is progressively withdrawn, at the rate of £1 for every £2 above £100,000 you earn. This means that if you earn £120,000 or more (2014-15) you receive no personal allowance and all your income is taxed. For 2013-14 this figure was £118,880.
Personal allowances for older people
People born before 6 April 1948 may qualify for a higher amount of tax relief, age-related personal allowance.
Born before 6 April 1948 and aged under 74
For people born before 6 April 1948 but aged under 75, this could mean a personal allowance of £10,500 in 2013-14 and 2014-15 (the figure has been frozen).
Aged 75 and over
People over 75 could get up to £10,660 in 2013-14 and 2014-15. However you are only entitled to the full amount of higher age-related allowance if your income during the 2013-14 tax year was 26,100 or less or is £27,000 or less during 2013-14.
Income above £27,000 (in 2014-15) but below £100,000
If your income is above £27,000 you'll lose the higher allowance at the rate of £1 for every £2 that your income exceeds £27,000.
Above a certain level of income, you lose any higher allowance and get just basic personal allowance. For those born before 6 April 1948 this will happen at £28,000 in 2014-15 and for those over 75 at £28,320 in 2014-15.
Income above £100,000
The reduction in basic personal allowance (by £1 for each £2 earned over the £100,000 limit) applies irrespective of age.
For example, a 65-year-old with a total income of £27,600 in 2014-15 (£600 over the limit) will therefore lose £300 from the higher allowance of £10,500, bringing it down to £10,200. For more details see Tax and allowances for older people.
Blind person's allowance
You may also be entitled to an additional allowance if you or your spouse or registered civil partner are blind or have severely impaired sight.
This is another full relief allowance as it is treated in the same way as the personal allowance, so increases the amount of income you can receive before you start to pay tax. In 2014-14 this allowance is £2,230.
In England and Wales
If you live in England or Wales, you will need to be certified as blind and appear on a local authority register of blind people to claim this allowance.
In Scotland and Northern Ireland
If you have not been certified as blind and live in Scotland or Northern Ireland you will qualify for the allowance if your eyesight is so bad that you are unable to perform any work where your eyesight is essential.
If your income is not enough to make use of the allowance, any unused balance can be transferred to your spouse or registered civil partner.
Married couple's allowance
This used to be an allowance given to all married couples, but you now qualify for this allowance only if you or your husband, wife or registered civil partner were born before 6 April 1935.
Unlike the personal allowance, the married couple's allowance is not an amount you can earn before you start paying tax. Instead, it's a restricted relief allowance, which means you can't claim the whole amount. The tax you pay is reduced by deducting 10% of the allowance from your final tax bill.
Born before 1935
The married couple’s allowance for 2014-15 for people born before 6 April 1935 is £8,165. So if you receive the full married couple's allowance of £8,165, £816 will be taken off your tax bill (£8,165 x 10%).
Income above £27,000
The amount of married couple's allowance you receive may be reduced if your income is more than £27,000.
However if your income is above this limit, age-related personal allowance is reduced first, by £1 for every £2 'excess income', until it falls to the basic personal allowance of £10,000. If your income is above £100,000 your basic personal allowance is reduced at the same rate.
After this you lose married couple's allowance at a rate of £1 for each remaining £2 of 'excess income', until you reach minimum married couple's allowance of £3,140 in 2014-15.
Claiming maintenance relief
You can claim this relief for certain maintenance payments you make if you or your ex-spouse or registered civil partner were born before 6 April 1935 and you pay the maintenance under a legally binding agreement.
It works in a similar way to the married couple's allowance. Your tax bill will be reduced by 10% of the maintenance relief allowance or the amount you pay in maintenance, if that amount is lower.
In 2012-13 the maintenance relief allowance is £3,140, so if you are eligible to claim you'll be able to deduct £314 or 10% of the amount you pay in maintenance, if that's lower.
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