Levels of Personal Allowance

The amount of your personal allowance depends on:

Total income means everything you receive from all taxable sources. That means you need to include things like pensions and interest on your savings in a building society before the tax has been taken off.

There are three levels of personal allowance

Personal Allowance	2008-2009 Tax Year	Income Limit (see note)
Basic Rate	£5,435	none
Age 65-74	£9,030	£21,800
Age 75 And Over	£9,180	£21,800

If you become 65 or 75 during the year to 5 April 2009, you are entitled to the allowance for that age group.

Note: If your income is over the 'income limit', the age related allowance reduces by half of the amount (£1 for every £2) you have over that limit, until the basic rate allowance is reached (you'll always get the basic allowance, whatever the level of your income).

So if, for example, you're 66 and have an income of £22,300 (£500 over the limit) your age-related allowance would reduce by £250 to £8,780.

The Chancellor has recently announced that the basic rate Personal Allowance will be increased by £600 from £5,435 to £6,035. The change will take place in September 2008 and the increased Personal Allowance will be backdated to 6 April 2008.

How do you get the personal allowance?

If HM Revenue & Customs (HMRC) knows your age you should get the personal allowance automatically. But bear in mind they won't know your age unless you've told them or shown your date of birth on a tax return or claim form. If you haven't done this already and you are 65 or over you need to contact your Tax Office.

If you think you've paid too much tax

If you want to claim a tax refund because you didn't use your personal allowance (or for any other reason), you need to do so within five years from the 31 January following the end of the tax year concerned.

A tax year runs from 6 April to the following 5 April. So for the tax year that ended on 5 April 2005 you need to contact your Tax Office by 31 January 2011.

Other allowances you may be able to get

Blind person's allowance

If you're registered blind, or are unable to perform any work for which eyesight is essential, you can claim blind person's allowance. Again, this is an amount of money you can get without paying tax. If you're married or in a civil partnership and can't use all your allowance, you can give the unused part to your spouse or civil partner.

The blind person's allowance for the tax year 2008-2009 is £1,800 - there are no age or income restrictions.

Married couple's allowance (also available to civil partners)

You need to be a taxpayer to claim this allowance, because it's deducted from your tax bill.

You can claim MCA if:

A minimum and maximum MCA allowance is set each tax year - and 10 per cent of the amount you qualify for is deducted from your tax bill.

You can learn more about how married couple's allowance is given and who makes the claim in our related article on tax allowances in retirement.

http://www.direct.gov.uk/en/MoneyTaxAndBenefits/Taxes/BeginnersGuideToTax/DG_4015583

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