Income Tax
We all have a personal allowance, which is a level of income that we are allowed to earn in each fiscal year (6th April – 5th April) before we have to pay tax. It is vital to understand these levels so that financial advice not only ensures that any unused personal allowance is utilised, where possible, but also does not adversely effect your tax position.
The table below details the Income Tax allowances levels.
Income Tax allowances table
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Income Tax allowances
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2008-09
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2009-10
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2010-11
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Personal Allowance (1)
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£6,035
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£6,475
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£6,475
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Income limit for Personal Allowance
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Not applicable
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Not applicable
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£100,000
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Personal Allowance for people aged 65-74 (1)(2)
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£9,030
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£9,490
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£9,490
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Personal Allowance for people aged 75 and over (1)(2)
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£9,180
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£9,640
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£9,640
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Married Couple's Allowance (born before 6th April 1935 but aged under 75) (2)(3)(4)
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£6,535
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Not applicable
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Not applicable
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Married Couple's Allowance - aged 75 and over (2)(3)
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£6,625
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£6,965
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£6,965
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Income limit for age-related allowances
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£21,800
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£22,900
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£22,900
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Minimum amount of Married Couple's Allowance
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£2,540
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£2,670
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£2,670
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Blind Person's Allowance
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£1,800
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£1,890
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£1,890
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(1) From the 2010-11 tax year the Personal Allowance reduces where the income is above £100,000 – by £1 for every £2 of income above the £100,000 limit. This reduction applies irrespective of age.
(2) These allowances reduce where the income is above the income limit – by £1 for every £2 of income above the limit. For the 2008-09 and 2009-10 tax years they will never be less than the basic Personal Allowance or minimum amount of Married Couple's Allowance. However, from the 2010-11 tax year the Personal Allowance for people aged 65 to 74 and 75 and over can be reduced below the basic Personal Allowance where the income is above £100,000.
(3) Tax relief for the Married Couple's Allowance is given at the rate of 10 per cent.
(4) In the 2009-10 tax year all Married Couple's Allowance claimants in this category will become 75 at some point during the year and will therefore be entitled to the higher amount of the allowance - for those aged 75 and over.
The level of tax payable will vary depending on your earnings level, the rate of tax is either 10%, 20%, 40% or 50% on different levels of your earnings. The table below gives you the tax rates for the different levels of income.
Income Tax rates and taxable bands
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2008-09
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2009-10
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2010-11
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Starting rate for savings: 10%*
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£0-£2,320
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£0-£2,440
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£0-£2,440
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Basic rate: 20%
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£0-£34,800
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£0-£37,400
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£0-£37,400
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Higher rate: 40%
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Over £34,800
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Over £37,400
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£37,401-£150,000
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Additional rate: 50%
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Not applicable
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Not applicable
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Over £150,000
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* From 2008-09 there is a 10 per cent starting rate for savings income only. If your non-savings income is above this limit then the 10 per cent starting rate for savings will not apply.