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As you get older there are certain age-related allowances that can reduce your tax. Some are amounts of income that you don't have to pay tax on – others are amounts that reduce your tax bill.
Everyone gets a 'personal allowance' that lets them have some tax-free income each year. The allowance may increase once you get to 65, depending on your income. But bear in mind that HM Revenue & Customs (HMRC) won't know your age unless you've told them or shown your date of birth on a tax return or claim form.
| Personal allowance levels | Tax-free amount 2007-2008 | Income limit (see below) |
|---|---|---|
| Basic allowance - up to age 64 | £5,225 | none |
| Age 65 to 74 | £7,550 | £20,900 |
| Age 75 or over | £7,690 | £20,900 |
If you become 65 or 75 during the tax year, you'll get the allowance for that age group.
If your income's over £20,900 your higher 'age-related' allowance reduces by half of the amount you have over that limit (a reduction of £1 for every £2 of income over the limit). But you'll never get less than the basic allowance of £5,255.
So, if you're 66 and your income is £21,400 (£500 over the income limit) your allowance of £7,550 falls by £250 to £7,300.
If you're registered blind, or are unable to perform any work for which eyesight is essential, you can claim blind person's allowance. Like your personal allowance, this is an amount of income you can get without paying tax. For 2007-2008 the allowance is £1,730.
If you're married or in a civil partnership and you don't pay enough tax to use all the allowance, you can transfer any unused allowance to your husband, wife or civil partner if they pay tax.
Married couple's allowance (MCA) is an amount that is taken off your tax bill – so you can only claim it if you pay tax.
If you are married and living together and at least one spouse was born before 6 April 1935, the husband can claim married couple's allowance (MCA).
Your tax bill is reduced by 10 per cent of the MCA to which you're entitled. This amount depends on the husband's income and the age of the older spouse.
If one of you dies, or if you divorce or separate, you'll get MCA for the whole of that year.
If you are married or in a civil partnership and living together and at least one spouse or partner was born before 6 April 1935, the higher earner can claim married couple's allowance (MCA).
The claimants tax bill is reduced by 10 per cent of the MCA to which he or she is entitled. This amount depends on the age of the older spouse or civil partner.
Period from which MCA is effective
In the year that you marry or form a civil partnership, your entitlement to MCA is reduced by one-twelfth for each complete tax month before the date of your marriage or civil partnership. For example, if you married or formed a civil partnership on 24 March 2008, in the tax year 2007/2008 you would only receive one-twelfth or one month's worth of the allowance.
If one of you dies, or the marriage or civil partnership dissolves or you separate, you'll get MCA for the whole of that year.
| Age of older spouse or civil partner (born after 6 April 1935) | Min MCA | Max MCA | Claimant's income limit (see note below) |
|---|---|---|---|
| Under 75 | £2,440 | £6,285 | £20,900 |
| 75 or over | £2,440 | £6,365 | £20,900 |
Because the MCA is applied at 10 per cent, your tax saving (based on a full year's eligibility) is at least £244 and up to £628.50 if you're under 75, and up to £636.50 if you're 75 or over. The actual amount depends on the claimant's income.
If the claimant’s income is over £20,900 the MCA may reduce. The amount of the reduction is worked out as follows:
A claimant who is 76 with income of £26,400 will be £5,500 over the limit. Half of this – £2,750 – comes off his or her allowances, like this:
To claim MCA you simply telephone your Tax Office or write giving details of your marriage/civil partnership ceremony and spouse/civil partner (including date of birth). If you fill in a Self Assessment tax return you'll be asked to include details of your MCA claim.
If your tax bill isn't high enough to use up all of your MCA you can use form 575 after the end of the tax year to transfer any unused allowance to your spouse or civil partner. Ask your Tax Office to post one to you. (If you're making a claim for repayment of tax on a form R40 you can also request form 575 by ticking the appropriate box.)
You can also decide to share the minimum MCA between you or, if you both agree, you can elect to transfer the whole of the minimum MCA to your spouse or civil partner. In this case you'll need to complete a form 18 'Transferring the married couple's allowance' before the start of the tax year. You can download the form from this page or it is available from your Tax Office.
You can get an allowance to reduce your tax bill for maintenance payments you make to your ex spouse or former civil partner if:
You can reduce your tax bill by the lower of:
To claim maintenance payments relief contact your Tax Office and ask for form 41.
If you are a higher rate taxpayer, you can claim tax relief of 18 per cent on gifts you make to charity through Gift Aid. (The charity claims back the basic rate of tax you have paid.)
If you're a basic or higher rate taxpayer, you will automatically get tax relief at your highest income tax rate if you make gifts to charity direct from your wages or pension pay packet using a scheme called 'Payroll Giving'. Your employer or pension provider will need to offer the scheme for you to do this.
You can also get income tax relief for gifts of land, buildings, shares and securities made directly to a UK charity.
You might be able to reclaim tax that's been taken off your savings interest and any retirement annuity income you're receiving if:
