Income Tax Personal Allowance

This personal allowance is the amount of income that you are entitled to have before you begin paying Income Tax. For the tax year 2008/2009 the Income Tax annual personal allowances are:

Thus, if you are fifty years old and have a taxable annual income of £60,000 you will not have to pay Income Tax on £5,435 of this but you will be required to pay Income Tax on the remaining £54,565. If you are blind you should be entitled to an extra personal allowance of £1,800. Thus, if you are fifty years old and blind, your personal allowance will be £7,235 for the tax year 2008/2009.

If you are over sixty-five years old you are entitled to a more generous personal allowance, but there is also an income limit imposed. This income limit means that every £2 of income you have which exceeds the limit reduces your personal allowance by £1, until your allowance is reduced to the basic rate. This means that if you are seventy years old and have a taxable annual income of £23,000 you have exceeded the income limit by £1,200 and your personal allowance will be reduced accordingly by £600. Your new personal allowance is £8,430; you will not have to pay Income Tax on this amount but you will be required to pay Income Tax on the remaining £14,570 of your allowance. For general information on Income Tax see Income Tax.