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In the UK tax system, personal allowance is the threshold above which
income tax An income tax is a tax A tax is a compulsory financial charge or some other type of levy imposed on a taxpayer (an individual or legal entity In law Law is a system A system is a group of Interaction, interacting or interrelate ...
is levied on an individual's income. A person who receives less than their own personal allowance in taxable income (such as earnings and some benefits) in a given
tax year A fiscal year (or financial year, or sometimes budget year) is used in government accounting, which varies between countries, and for budget purposes. It is also used for financial reporting by businesses and other organizations. Laws in many jur ...
does not pay income tax; otherwise, tax must be paid according to how much is earned above this level. Certain residents are entitled to a larger personal allowance than others. Such groups include: the over-65s (followed by a further increased allowance for over-75s), blind people, and married couples where at least one person in the marriage (or civil partnership) was born before 6 April 1935. People earning over £100,000 a year have a smaller personal allowance. For every £2 earned above £100,000, £1 of the personal allowance is lost; meaning that incomes high enough will not have a personal allowance.


Personal allowance tapering

On 22 April 2009, the then Chancellor
Alistair Darling Alistair Maclean Darling, Baron Darling of Roulanish, (born 28 November 1953) is a British Labour Party (UK), Labour Party politician who served as Chancellor of the Exchequer in the Labour Government 2007-2010, Labour Government from 2007 to 20 ...

Alistair Darling
announced in the 2009 Budget statement that starting in April 2010, those with annual incomes over £100,000 would see their Personal allowance reduced by £1 for every £2 earned over £100,000, until the Personal allowance was reduced to zero, which (in 2010-11) would occur at an income of £112,950. For every additional £100 earned, the Personal allowance was reduced by £50, meaning that an additional £50 would be taxed at the marginal rate (40%), resulting an additional tax liability of £20, resulting in an effective additional 20% marginal taxation over and above the 40% tax already due. This resulted in an anomalous effective 60% marginal tax rate in the income band between £100,000 and £112,950, with the marginal tax rate returning to 40% above £112,950. As the Personal allowance has grown over the years, this has resulted in a corresponding increase in the size of the effective marginal 60% tax band. As of 2021-22, the effective 60% marginal tax rate now arises for incomes between £100,000 and £125,140.


History

On 22 June 2010, the new Chancellor
George Osborne George Gideon Oliver Osborne (born Gideon Oliver Osborne; 23 May 1971) is a British politician and newspaper editor who served as Chancellor of the Exchequer The chancellor of the Exchequer, often abbreviated to the chancellor, is a seni ...

George Osborne
, as part of the coalition deal which sought to increase the Personal Allowance to £10,000 from April 2015 as per Lib Dem policy, made the first increase of £1,000, making it £7,475 for the 2011-12 tax year. During the 2011 Budget, the allowance was raised by £630 to £8,105 from April 2012. In 2013,
George Osborne George Gideon Oliver Osborne (born Gideon Oliver Osborne; 23 May 1971) is a British politician and newspaper editor who served as Chancellor of the Exchequer The chancellor of the Exchequer, often abbreviated to the chancellor, is a seni ...

George Osborne
revised the plans to increase the Personal Allowance and bring forward to date at which it would reach the £10,000 target. This resulted in the allowance being raised to £9,440 from April 2013, before being increased to £10,000 from April 2014, a year earlier than originally planned. All these increases in the personal allowance came from rises in the personal tax. In 2016, Osborne determined that the tax increases no longer applied for personal allowance and decided to cut taxes personal taxes £1,000 less that the 2011 level when he increased the personal allowance to £11,500.


Married Man's allowance

Married Man's allowance was the allowance for a legally married couple. The allowance was given at the man's highest rate of tax. During the early-1990s, then-
Chancellor of the Exchequer The chancellor of the Exchequer, often abbreviated to the chancellor, is a senior minister of the Crown within the Government of the United Kingdom, and the chief executive officer of HM Treasury, Her Majesty's Treasury. As one of the four Grea ...
,
Norman Lamont Norman Stewart Hughson Lamont, Baron Lamont of Lerwick, (born 8 May 1942), is a British politician and former Conservative Conservatism is an aesthetic Aesthetics, or esthetics (), is a branch of philosophy that deals with the na ...

Norman Lamont
overhauled the allowance and introduced the 10% allowance, which meant that all men had the same amount of money in their pocket, irrespective of highest tax rate. The allowance was scrapped from April 2000, first being announced in then-Chancellor
Gordon Brown James Gordon Brown (born 20 February 1951) is a British politician who served as Prime Minister of the United Kingdom The prime minister of the United Kingdom is the head of government The head of government is either the h ...

Gordon Brown
's 1999 budget, with the exception of people married, or in civil partnerships (introduced in 2005) where one spouse was born before 6 April 1935.


History of allowances


See also

*
Income tax in Scotland Income tax in Scotland is a tax of personal income gained through employment. This is a tax controlled by the Scottish Parliament, and collected by the UK government agency HM Revenue & Customs. As proposed in the Scottish 2018-19 budget, the Sco ...
*
Welsh Rates of Income Tax Welsh Rates of Income Tax (WRIT) ( cy, Cyfradd Treth Incwm Cymru (CTIC)) is part of the Taxation in the United Kingdom, UK income tax system and from 6 April 2019 a proportion of income tax paid btaxpayers living in Walesis transferred straight to ...


References

{{Reflist


External links

* UK Government website
Income Tax rates and Personal Allowances
* Detailed list of rates paid between 1972 - 2005

* About the Personal Savings Allowance
Why you need to know about new Personal Savings Allowance
Income taxes Personal taxes Taxation in the United Kingdom