Personal allowance

By Tolley
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The following Personal Tax guidance note by Tolley provides comprehensive and up to date tax information covering:

  • Personal allowance
  • Personal allowance
  • Age-related personal allowance (tax years before 6 April 2016)
  • Year of death
  • Reporting
  • Tax planning
  • Overseas aspects

The personal allowance is a deduction against net income that is available to all UK resident individuals (and some non-residents).

 

The personal allowance is a deduction against net income that is available to all UK resident individuals (and some non-residents, see below). The basic personal allowance for 2019/20 is £12,500 (£11,850 for 2018/19).

Where an individual’s net income exceeds £100,000, his personal allowance is reduced by £1 for every £2 of income above £100,000.

ITA 2007, s 35(2)–(4)

A husband and wife / civil partners are treated as separate persons and so each is entitled to a personal allowance to set against their own personal income. Where one spouse / civil partner is working and the other is not, both personal allowances can be utilised by the transfer of income-producing assets to the non-worker. See the Utilising allowances and lower rate bands guidance note for more details.

From 6 April 2015, an individual is able to ‘transfer’ 10% of his personal allowance (£1,250 for 2019/20; £1,190 for 2018/19) to his spouse / civil partner, who receives a tax reduction of 20% of this amount. In order to make the transfer, both parties must not be higher rate or additional rate taxpayers. See the Transferable tax allowance guidance note.

ITA 2007, ss 55A–55E
Personal allowance

The personal allowance is a deduction from net income (ie a step 3 deduction, see the Proforma income tax calculation guidance note).

ITA 2007, s 23

It is generally true that if the individual has insufficient income in the tax year to use the allowance, it is lost; it is not possible to carry forward the unused proportion. However, from 2015/16, it may be possible to transfer 10% of the unused allowance to the spouse / civil partner, see the Transferable tax allowance guidance note.

To be entitled to a personal allowance, the individual must fall into one of the residence categories below:

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