Published On: Thu, Jul 11th, 2019

What is tax allowance for pensioners? Personal tax free allowance 2019/20 amount explained | Personal Finance | Finance

In the UK, Income Tax may be payable to HM Revenue and Customs (HMRC) on taxable income. However, taxpayers are allowed to enjoy a certain amount of taxable income tax-free each year. This is known as the standard Personal Allowance. The figure can change for each tax year, but in 2019/20, it currently stands at £12,500. Any further taxable income may be taxed – and the band that the amount falls into will affect the rate that is payable.

Basic rate tax, for instance, spans taxable income of £12,501 to £50,000.

A person will be required to pay a 20 per cent rate of tax on the portion of taxable income in this category.

Should taxable income be between £50,001 to £150,000, in 2019/20, the tax rate on this amount of money stands at 40 per cent.

Should taxable income exceed £150,000, the Additional tax rate applies, which is 45 per cent.

It may be that a person loses all or part of their Personal Allowance, if they have a taxable income of more than £100,000.

That’s because the Personal Allowance reduces by £1 for every £2 that an individual’s adjusted net income exceeds this amount.

If the income is £125,000 or greater, the taxpayer’s Personal Allowance will stand at zero. also advises that these people will also need to do a Self Assessment tax return.

“If you do not usually send a tax return, you need to register by 5 October following the tax year you had the income,” the website states.

Some people may choose to claim Marriage Allowance, meaning an individual transfers some of their unused Personal Allowance to their spouse.

What is the tax allowance for pensioners?

Income Tax may still be payable during one’s retirement.

Most pensions, including state pensions, company and personal pensions, and retirement annuities, may be subject to tax.

Due to the Personal Allowance, the first £12,500 of taxable income between April 6 and April 5 is not taxed.

The Money Advice Service states that a person can normally withdraw up to 25 per cent of their pension pot tax-free.

This tax free amount does not use up the Personal Allowance.

“The remaining pot is used to provide an income or can also be withdrawn; in both cases this is taxable,” it states.

“That means any money you receive over your Personal Allowance will be taxed.”

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