UK taxes compared How personal allowance has changed

Personal allowance is the amount of income you can keep before you need to pay any tax. Although this can differ, depending on individual circumstances, most people get the standard allowance - which has increased significantly in recent years. 
Personal allowance

Personal allowance

While personal allowance rose fairly steadily in the 1990s and between 2000 and 2010, it has increased sharply under the current Coalition government. This reflects a deliberate policy of taking low earners out of the tax system as well as reducing the tax bill of standard rate taxpayers

  • In 2010/2011 it was £6,475 
  • In 2012/13 it was £8,105
  • In 2013/14 it was £9,440
  • In 2014-15 it is due to reach £10,000.

Personal allowance is used to set tax codes under PAYE. It can be adjusted individually to take account of various tax reliefs or tax liabilities from previous years.

Losing your personal allowance

Not all taxpayers receive personal allowance. It starts to be withdrawn once your income exceeds £100,000, at the rate of £1 for each extra £2 of income. For 2013-14, this means that those whose income exceeds £118,880 have no tax-free amount.  

Age-related allowance

Historically, those aged over 65, whose income falls below a certain limit have received a means tested higher ‘age-related’ allowance, but this is being phased out as personal allowance is increased.  

Currently, age-related allowance is withdrawn if your income is above the threshold (£26,100 in 2013-14, £27,000 in 2014-15) at the rate of £1 for each extra £2 of income, until you receive just the standard personal allowance. 

There was a steep increase in age-related allowance in 2008-9, when it rose from £7,550 to £9,490. For those aged 75 and above it went up from £7,690 to £9,180.

In 2013, the government froze age-related allowance, so that rates for 2013-14 and 2014-15 stay the same (£10,500 and £10,660). At the same time, it restricted eligibility to those born before 6 April 1948. If you were born before 6 April 1938 you are eligible for the higher rate of age-related allowance (depending on your income).

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