Personal allowance

This is the amount of income you can receive that you don’t have to pay tax on. In 2017/18 this is £11,500. The allowance is lost at a rate of £1 for every £2 of income where your adjusted net income is over £100,000, until the allowance is totally extinguished. This creates an effective income tax rate of 60% for income levels between £100,000 and £123,000.

Pension contributions and cash charitable donations can increase the amount of income that you can receive before you start to lose your personal allowance. In 2017/18, £1,150 of an individual’s personal allowance can be transferred to a spouse or civil partner, providing that neither the transferor nor recipient is liable to income tax above the basic rate band.

As with all of our tax tips and web pages this information is necessarily summarised and of a general nature.  If you would like detailed specific advice please contact us.