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Allowances: What are yours?

Most people are entitled to an allowance to deduct from their income tax-free. Do you know what you're entitled to?

These deductable allowances are called personal allowance. The amount varies with age and your adjusted net income.

Age-related personal allowance

People aged 65 and over get a higher personal allowance, however, this is still subject to any net income received. You will lose £1 of allowance for every £2 that your net income exceeds £26,100. However, the reduction stops when an allowance of £9,440 is reached. The combined effect of tax at 20 per cent and the loss of personal allowance is an effective tax rate of 30 per cent.

Personal allowance (any age)

Personal allowance is set at £9,440 but those who earn more than £116,210 lose this and the whole of their net income is taxable. If your income is between £100,000-£116,210 then you lose £1 of allowance for every £2 above £100,000. The combined tax effect of this plus the potential loss of personal allowance is an effective tax rate of 60 per cent.

Married couple's allowance

Married couples where at least one partner is 75 years old or above are entitled to claim 10 per cent of £7,705 if net income is below £26,100. Civil partnerships also apply and the net income is based on the earnings of the male spouse alone for marriages before 2005.

Blind person's allowance

People who are registered as blind can apply for an extra £2,160 from the government. No age restriction applies.

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