Tax Rebates & Refunds

All you need to know about your personal tax-free allowance

August 27, 2012
Posted in Income Tax — Written by Geoffrey

The way income tax is calculated can be quite complicated to understand, but it can be helpful to know some of the basics about the tax you pay on your earnings.

One of the most important things to know about is your personal tax-free allowance. This is the amount you can earn before you start paying income tax.

What is my personal tax-free allowance?

The tax-free allowance tends to be the same for everyone, and this year (2012-2013) the basic personal allowance is £8,105. The income limit for the basic personal allowance is £100,000.

However, your age also affects your personal allowance amount. For example:

• If you are between 65 and 74 years old, your personal tax-free allowance is £10,500 and your income limit is £25,400
• If you are over 75 years old, your personal tax-free allowance is £10,660 and your income limit is £25,400

Is everyone eligible for a tax-free allowance?

The only people who can’t claim the personal allowance are those who are non-UK domiciled and claim the ‘remittance’ basis of tax. This means that you only pay tax on income you are bringing into the UK.

What if I pay too much tax?

If for some reason you have paid too much tax, possibly because your personal allowance limit was wrong, you can claim a tax rebate from HMRC.

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