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# Reader’s Question: Personal income tax allowances

I will be 65 and a pensioner at the start of the 2011/2012 tax year and noticed that the increase in the tax code is only going up by £500 instead of the £1000 that most everyone else will get. Is there a way to challenge this?

Russell

My response

Russell

I think you may be slightly confused. When you say ‘tax code’ I think you are referring to the personal income tax allowance. This is the amount that an individual can earn before they have to start paying income tax. The amount of your personal allowance depends on your age and your total income during the tax year. The table below details the various personal allowances available:

Income Tax allowances 2009-10 2010-11 2011-12
Personal Allowance for those under age 65 £6,475 £6,475 £7,475
Personal Allowance for people aged 65-74 £9,490 £9,490 £9,940
Personal Allowance for people aged 75 and over £9,640 £9,640 £10,090

But to complicate things slightly – from the 2010-11 tax year the Personal Allowance reduces where an individual’s income is above £100,000 – by £1 for every £2 of income above the £100,000 limit. This reduction applies irrespective of age.

For those aged between 65-74 their higher personal allowance (£9,940 for the 2011-12 tax year) will reduce where their income is above the income limit for age-related allowances (which will be £24,000) by £1 for every £2 of income above the limit. But their personal allowance will not reduce to below that for someone aged under 65 with the same level of income as them.

What’s this all got to do with you?

Well assuming that you don’t have earnings in excess of £24,000 your personal allowance for the 2011-12 tax year will become £9,940 because you turn 65. So you will personally see your annual allowance increase from £6,475 (as it is in the current tax year) to £9,940 in April. So you certainly shouldn’t have too many complaints.

Now the point of all the waffle in the section below the pretty table is to highlight that the over 65s get the same basic personal allowance plus a Brucie Bonus on top (so bringing their allowance up to £9,940), as long as they don’t earn to much. If they earn too much then the Brucie Bonus is gradually taken away, but their personal allowance will never be below that of someone under 65 on the same level of income.

Yes, someone currently over 65 will only see their personal allowance go up by £500 while those aged under 65 see their allowance go up by £1,000. But even the over 65s also benefit from the £1,000 increase if they have sufficient income to warrant the complete removal of the Brucie Bonus part of their age related personal allowance. As their personal allowance won’t drop below £7,475 (assuming they don’t earn over £100,000 per year)

So you see, it’s not all bad news and the £500 increase was certainly more than a lot of market commentators were originally expecting. But if you are still unhappy then I suggest that you write to your local MP.

Image: Filomena Scalise / FreeDigitalPhotos.net

### About Damien Fahy

When the rest of the City go home at night I switch on my laptop & sit up half the night writing MoneytotheMasses.com. Why? For two reasons. Firstly, because I hate the way the masses are being left to fend for themselves because they can't afford financial advice. Secondly, because no one else will. So I'm trying to rectify this by educating, informing and helping as many people as possible for FREE.

### One comment

1. Just to let you know that, you will have to phone up HMRC to have your age allowance, given to you, in the tax year that you reach the age of 65, and after a long wait, and a load of waffle from the nice tax man, about we dont usually change your code number until you reach the age of 65, and draw, your state pension… He will then change it for you.. Saves you paying any tax this year on a small Oc/, pension in the 10 month period before drawing a state pension, when you will start paying tax again…. hope that makes sense to anyone in the same boat??

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