What is a Personal Tax Allowance?
Posted 11 Jun 15
A personal tax allowance is the part of your income, which you can keep tax free.
Unlike any other taxes, this one changes every year and for the 2015/16 tax year, it is £10,000. Your personal tax allowance might be bigger if you were born before 6th of April 1938 or if you receive Blind Person’s Allowance, or smaller if your income is over £100,000.
If you earn more than £100,000, you can’t claim income tax allowance at all. It is important that you check each year what the amount of your earnings you can claim each year - this information can be easily found on the HMRC website.
How Do I Claim My Personal Allowance?
Claiming your personal tax allowance is simple. The personal tax allowance is automatically given to you when you file your self assessment. If you have any problems or feel confused about your self assessment, our accountants are here to make it quick and simple for you.
Contact us to find out how you can avoid the long and exhaustive amount of paperwork and never worry about meeting the deadlines.
When Do I Start Paying Tax?
The majority of people pay the basic rate tax on their income when it exceeds £10,000 (‘around’ - this amount is different for each year as we’ve mentioned earlier). The basic rate tax is currently 20%.
If your earnings do not exceed £22,000 for all your earned income, you only pay income tax over your personal income tax allowance. Profits-for-tax is a term used to describe only the amount you earn in a year which is taxable. This sum is different from your actual profits, which parts of can be deduced from tax.
Contact us to find out more what tax benefits you can claim.
It is important that you keep your current and accurate records of your income, expenses and company reports and that you check the updated sum of your personal tax allowance at the start of each tax year on 6th April.
In order to avoid any confusions which can unfortunately result in financial penalties, contact our team and we’ll be happy to explain how each tax allowance works and which of them apply to your business and personal situation.