Personal Tax Allowance

The vast majority of UK taxpayers living in the country on a regular basis are entitled to a personal allowance – a level of income that may be earned without incurring any tax liability. In 2011/12, this is £7,475 for taxpayers under the age of 65, an increase over the rate of £6,475 in 2010/11.

The allowance is subject to an income ceiling of £100,000. If the adjusted net income exceeds that figure, the Personal Allowance is reduced by £1 for every £2 of additional income. Different rates, the age related allowances, and a different ceiling apply to taxpayers over the age of 65.

The Personal Allowance should be paid automatically for most taxpayers. If you are receiving a salary or an occupational pension, the allowance will be calculated weekly or monthly as part of your Pay As You Earn calculation. The allowance will be taken into account, along with any other relief to which you are entitled, and the salary you receive above the allowance taxed at the appropriate rate or rates.

The PAYE system

The PAYE system has the advantage here that the taxpayer has the allowance distributed across the entire year and is thus paying only that tax due on the taxable part of the income.

The Personal Allowance is applied to all UK taxpayers apart from those who are outside the country and claiming a special remittance tax basis. In this, the taxpayer pays only on income remitted to the UK.

If, for some reason, you have not claimed the Personal Allowance, or it has not been automatically calculated as part of your PAYE, you may claim a tax refund. This must be done within five years of the January 1 which follows the end of the tax year to which the claim relates.

Personal Tax Allowance Calculation

The Personal Allowance is calculated as follows:
Suppose you earn £110,000 per year and you are under 65. Your basic Personal Allowance is £7,475. Your income is over the £100,000 ceiling, so the allowance will be reduced by £1 for every £2 in excess. The excess is £10,000 so your Personal Allowance is reduced by £5,000, leaving you an adjusted Personal Allowance of £2,475.

If your income is below the ceiling, your Personal Allowance will always be the full £7,475.
If you pay tax on your income and thus are entitled to claim a Personal Alliance but are not receiving it, you should talk to your tax office.

There are a number of other allowances applicable, such as the Blind Person’s Allowance, the Age Related Allowances and the Married Couple’s Allowance, but the Personal Allowance is the only one of these that is universally applicable, subject to the income ceiling.

You might like to think of it as the Treasury’s way of letting you think you’re getting something for nothing before they extract money from you pocket in all kinds of more subtle ways.

Age Related Tax Allowance

Most UK taxpayers are given a Personal Allowance, an amount of annual income they are allowed to earn tax-free. For taxpayers under the age of 65, the basic allowance is £7,475. If the income after adjustments is greater than £100,000, the allowance is reduced by £1 for every £2 greater than £100,000.

Your personal tax allowance increases once you reach the age of 65 to £9,940. However, while with one hand graciously increasing the allowance, with the other hand the government lowers the ceiling for the adjusted income to £24,000, and the allowance is again reduced by £1 for every £2 in excess of that figure.

Thus for a 65-year old with an adjusted net income of £36,000, the allowance is reduced by £6,000 to leave £3,940.

At the age of 75, the Personal Allowance increases again to £10.090, again with an income limit of £24.000 after which it is again reduced by £1 for every £2 in excess.

Inform HMRC

In some cases, HM Revenue and Customs may not be aware of the taxpayer’s age, so it is important to notify them on reaching the age of 65, so that the allowance is increased appropriately. This should be done using the Pension Coding form P161. This allows HMRC to calculate what allowances you are entitled to and so whether you should be paying tax, an how much, when your pension income begins. If you don’t return it, you could be overcharged.

The Personal Allowance has been raised in the 2011/12 tax year from £6,475 to £7,475 for taxpayers under the age of 65 and from £9,640 to £9,940 for those over 75. The amount of the age related tax allowance for taxpayers between 65 and 74 remains unchanged. In both the older age groups, the income limit has been raised from £22,900 to £24,000.

The adjusted net income is the total income from all sources adjusted to take deductible allowances into account. Capital gains are not included, because they are taxed separately. There is no provision for personal allowance to be used to offset capital gains.
The age band becomes applicable at the beginning of the tax year in which the taxpayer attains the age of 65 or 75.

Calculation and Restrictions of Age Related Tax Allowance

In order to work out the amount of the age related allowance to which you are entitled, simply add up all your taxable income then subtract all tax-free allowances to arrive at the adjusted net income. If it is under £24,000, then the full allowance for the appropriate age band applies. If it is over that figure, then you should reduce the allowance by £1 for every £2 by which it is over.

The age related allowance is not payable to taxpayers who are living outside the UK and claiming the special remittance basis for tax, in which tax is only paid on the portion of the income brought into the UK.

There is little that can be done to reduce the effect of the somewhat low income ceiling for a taxpayer who is receiving a fixed income from a pension scheme. One option is to continue making contributions to a personal pension. 

”I strongly object to the Governments proposal toscrap the old age allowance tax relief and hope this proposal will be put backto the commons for further debate”

Married Couples Tax Allowance

The married couple’s tax allowance is basically a tax break for people over 75 who are in a marriage or civil partnership.

If the couple live together and either one or both of them is aged 75 or over, or turns 75 within the current tax year, one of them may claim an additional allowance (on top of the personal allowance. Which of the couple is entitled to the claim depends on the date of the marriage or registration of the civil partnership.

For couple who tied the knot before December 5, 2005, the man is entitled to claim the allowance. For a ceremony which took place on or after that date, then the partner with the highest income is entitled to the allowance.

In both cases, if the partner entitled to claim is unable to take advantage of all or part of the allowance, it may be transferred in whole or in part to the other.

2011/12 Married Couples Tax Allowance

In 2011/12, the maximum Married Couple’s tax allowance has been raised to £7.295, up from £6,965 in the previous year. Unlike the Personal Allowance and the Age related Allowances, only 10% of the amount can be set off against income, bringing the effective value of the allowance down to £730.

The same income ceiling applies to the Married Couple’s Allowance as to the Age Related Allowances. For every £2 by which the total adjusted income exceeds £24,000, the allowance is reduced by £1. This also applies if the partner entitled to claim the Married Couple’s Allowance is under 65.

This means that the reduction in personal allowance or age related allowance is calculated first, and the Married Couple’s Allowance will only be reduced if there is still any allowance remaining above the minimum entitlement. It cannot, however, be reduced to below the minimum Married Couple’s allowance which can be claimed which in the 2011/12 tax year is £2,800. This leaves an actual married Couple’s Allowance of £280, as only 10% of the allowance can be claimed. The minimum allowance has been raised from a figure of £2,670 in the 2010/11 tax year.

If the marriage or civil partnership is registered during the current tax year, the entitlement to the Married Couple’s Allowance applies only to that portion of the year following the marriage or registration. This means that one twelfth of the allowance can be claimed for each month of the year including and following the month of the marriage.

In the case of dissolution of the partnership or the death of one of the partners, the allowance is paid in full for the current tax year.

Further Explanation of the workings of the Married Couples Tax Allowance
In practice, it works like this:

You’re 80 and you married your wife, who is aged 67, In August 2008.

You aren’t working, but the gross sum of your state pension and a private pension in 2011/2012 is £12,000. Your wife earns £50,000 a year.

Because you are over 75, your wife is entitled to claim the Married Couple’s Allowance because she earns more than you do and you were married after December 5, 2005.
Because you’re over 75, you have a Personal Allowance of £10,900 and this is not reduced because your income is less than the ceiling of £24,000.

Your wife is over 65 and so she is entitled to the lower rate of age related allowance. However her salary of £50,000 is £26,000 in excess of the ceiling, which means the Married Couple’s Allowance is reduced by £13,000 (£1 for every £2 above the ceiling).
Because her age related allowance may not be reduced below the basic personal allowance (£7,475), only £5,525 of this excess is subtracted from the age related allowance, leaving her the sum of £7,475 to be set off against her Married Couple’s Allowance.

But because the minimum Married Couple’s Allowance is £2,800, only £4,495 can be set off against the allowance, and this is done, leaving her with the minimum Married Couple’s Allowance of £2,800.

Thus her total claimable allowances are the age related allowance, reduced as calculated above, of £7,475 plus 10% of the minimum Married Couple’s Allowance or £280. This gives her total allowances of £7,755.

Because your wife has used all the Married Couple’s Allowance to reduce her income, there is no portion of the allowance remaining for her to transfer to you.

Blind Person’s Tax Allowance

The Blind Person’s Allowance is an additional allowance which is added to the Personal Allowance if you’re certified blind. If you are registered with a local authority as blind, or if you live in Scotland or Northern Ireland and are unable to undertake any job for which sight is essential, you are eligible for the allowance.

The allowance is an additional amount of annual tax free income. There are no age or income restrictions applying to this allowance. If you are not paying tax, or not enough tax to take advantage of the Blind Person’s Allowance, it may be possible to transfer the allowance to your spouse by completing form 575 or telephoning HMRC.


The Blind Person’s Tax Allowance for the 2011/12 tax year is £1,980, up from £1,890 in 2010/11.

In the individual’s spouse or civil partner also qualifies for the Blind Person’s Allowance, each may claim the full allowance, increasing their total tax allowance to £3,780.

People who are registered as partially sighted are not entitled to claim this allowance.
In England and Wales, a person who registers as blind during a tax year may claim the allowance for the whole of that year. Because there are no registers of the blind in Scotland and Northern Ireland, the criterion is that you are unable to perform any work for which eyesight is required. This means that the allowance is not restricted to people who are totally blind.

The Blind Person’s Tax Allowance is the last remaining disability allowance in the tax structure, the others having been absorbed into the benefits system. The allowance has been criticised as being of little value and complex to administer.

Obtaining a Blind Person’s Tax Allowance

Only a third of eligible individuals have claimed the allowance, either because the rest are unaware of it or they simply didn’t have the sufficient income to be able to take advantage of it. Other possible reasons are that it has not been sufficiently publicised, associations for the blind have not promoted it and that the system for claiming it is difficult to understand.
In addition, because the onset of sight impairment is usually a gradual process, people are slow to realise that they have crossed the line to serious impairment of sight. This applies particularly in the case of macular degeneration. Because of this it is important that the visually impaired are tested regularly to ascertain the point at which they become legally blind. It is also important that they realise this may be the case although even while they still have some sight remaining.

The Blind Person’s Allowance is one of 47 tax relief measure which the Office of Tax Simplification recommended scrapping in early 2011, describing them as outmoded and lacking in rationale. The office called for major simplification of the system by eventually merging income tax and national insurance.

If you do not at present receive the Blind Person’s Allowance but think you may be eligible, you should contact the HMRC Welfare Rights officer. This can be done through your local Tax Office.

Income Tax Calculator UK 2011 – 2012

Income Tax calculator UK 2011-2012. Free online calculator to help you obtain a detailed breakdown of your income and salary deductions.

Our handy calculator will help you to determine the amount of income tax you are due to pay.The workings of the calculator are based on the current 2011-2012 tax year, as well as the previous two tax years 2009-2010 and 2010-2011.

Remember the tax year runs from the 6th of April until the 5th of April the following year.
The results are simply and accurately displayed according to the current HMRC tax regulations.

Every working individual both employed and self employed is entitled to a personal tax allowance.In addition there are also tax allowances for certain age range brackets, for registered blind persons and also for married couples aged sixty five plus.

All these tax allowances can be used in our free calculator by selecting the correct entry in the appropriate field space.

Student loan repayment deductions(currently applicable when taxable salary is above £15k pa), employees national insurance and employer’s national insurance contributions can also be readily calculated.

If you enter a gross annual salary the calculator will easily give you a full income and deduction breakdown for year, month and weekly wages.

Ok time to get clicking and find out just exactly what you receiving in your hand for your hard labour.

Enjoy using our tax calculator and do not hesitate to get in touch if you have any queries or suggestions.

Further information and explanations of tax deductions as well as other useful calculators can be found by clicking any of our navigation bar links on the left of the page.

Check back often as we update our tax calculator with every budget change and also add handy tips on saving money and reducing tax liabilities with regular website updates.

Income Tax Calculator Admin Team 2011