Income Tax
Income Tax Allowances
The income tax Personal Allowance for the year 2013/2014, for people born after 5 April 1948, is £9,440 (2012/2013 - £8,105). If your total income is less than this during the tax year, you have no tax to pay.
If you are on an income of less than £9,440 (2013/2014), your bank or building society can provide you with HMRC's Form R85 to apply for your interest to be paid gross.
For those aged 65 and over (up to and including 2012-2013) and born before 6 April 1948 (from 2013-2014), the income tax Personal Allowance can be reduced below the basic Personal Allowance where the income is above £100,000.
Tax rates 2013-14: Income Tax Personal Allowances
| 2013 / 2014 | 2012 / 2013 | |
|---|---|---|
| Personal Allowance(1) | N/A | £8,105 |
| Personal Allowance for people born after 5 April 1948(1) | £9,440 | N/A |
| Income limit for Personal Allowance | £100,000 | £100,000 |
| Personal Allowance for people aged 65-74(1) (2) | N/A | £10,500 |
| Personal Allowance for people born between 6 April 1938 and 5 April 1948(1) (2) | £10,500 | £N/A |
| Personal Allowance for people aged 75 and over(1) (2) | £N/A | £10,660 |
| Married couple's allowance for people aged 75 and over(2) (3) | £7,915 | £7,705 |
| Income limit for age-related allowances | N/A | £25,400 |
(1). The Personal Allowance is reduced by £1 for every £2 that an individual's adjusted net income exceeds £100,000. 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. The Personal Allowance for people aged 65 and over (up to and including 2012-2013) and born before 6 April 1948 (from 2013-2014) 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%.
Income tax bands 2013-2014
| Rate | 2013 / 2014 Band | 2012 / 2013 Band |
|---|---|---|
| Starting rate for savings: 10%(4) | £0 - £2,790 | £0 - £2,710 |
| Basic rate: 20% | £0 - £32,010 | £0 - £34,370 |
| Higher rate: 40% | £32,011 - £150,000 | £34,371 - £150,000 |
| Additional rate: 50% | N/A | Over £150,000 |
| 45% rate from 6 April 2013 | Over £150,000 | N/A |
(4). The 10% Starting rate applies to savings income only. If, after deducting your Personal Allowance from your total income liable to Income Tax, your non-savings income is above this limit, then the 10% Starting rate will not apply.
The self-employed can claim business expenses against their income. So make sure you include all possible justifiable business expenses on your self-assessment form. This also applies to capital allowances for expenditure on plant and equipment, including computers and tools, for example, used for your business.
It is worth remembering you may be able to pay further contributions to your pension, which can utilise unused tax relief.
Since its introduction in 1990, Gift Aid allows taxpayers to receive tax relief on gifts made to qualifying charities.
One other point to remember is if one spouse is a tax payer and the other is not or pays tax at a lower rate it is worth considering switching certain investments to take advantage of their unused tax allowances.
Levels and bases of and reliefs from taxation are subject to change and their value depends on the individual circumstances of the investor.
The Financial Conduct Authority does not regulate Taxation & Trust advice.
For further information about the 2013 Budget changes please see click here.
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