Personal allowance and tax band explained.
The Personal Allowance is the amount of income everyone is entitled to receive free of tax each year. the amount for the tax year 2018/19 is £11,850.
Every individual living in the UK is entitled to a personal allowance.
If it is not fully used, then the unused allowance cannot be carried forward to be used during a new tax year.
The personal allowance cannot normally be transferred between Individuals.
Changes to the personal allowance.
However, this changed last year because of 2015/16 due to the introduction of the marriage allowance which allows partners and spouses to transfer their personal allowance if certain conditions are met.
It has changed every year and has continued to be gradually increased over a period now.
The personal allowance for Individuals born after 5 April 1948
| 2013/14 | 2014/15 | 2015/16 | 2016/17 | 2017/18 | 2017/18 |
| 9,440 | 10,000 | 10,600 | 11,000 | 11,500 | 11,850 |
The personal allowance for taxpayers with a net income of over £100,000.
Also, for individuals that have a net income of over £100,000. They don’t have a full allowance. They lose out £1 for every £2.00 over £100,000 until they have no allowance. So, as individuals, we have a net income of over £123,700.
How are individuals are taxed?
Employees rely on their employers to calculate their taxes and apply their details properly which include the tax code and the tax and national insurance will be calculated by software and payment made to the revenue
Tax band in the UK
The HMRC use the tax band to determine how much tax we pay. This band would be applied after the personal allowance you are entitled is taken out.
| 2015/16 | 2015/16 | 2016/17 | 2016/17 | 2017/18 | 2017/18 | 2018/19 | 2018/19 | |
| Band | % | £ | % | £ | % | £ | % | £ |
| Nil | 0 | 0-10600 | 0 | 0 – 11,000 | 0 | 0 -11,500 | 0 | 0-11,850 |
| Basic | 20 | 10601-31,785 | 20 | 11,001-32,000 | 20 | 11501-45,000 | 20 | 11851-46,350 |
| Higher | 40 | 31,786-150,000 | 40 | 32,001-150,000 | 40 | 45,001-150,000 | 40 | 46351-150,000 |
| Additional | 45 | 150,000 and above | 45 | 150,00 above | 45 | 150,000 and above | 45 | 150,000 and above |
You either pay tax at 0%, 20%, 40%, and 45%.
The tax band also has been increased drastically by the government this new tax year.
Tax band extension.
This band can also be extended when individuals claim some tax relief from the revenue.
What this does is that it pushes the individual back to the band before and pays tax at a lower rate.
Personal allowance converted to a tax code.
Our Northampton accountants have given a lot of advice recently on tax codes, so we feel as though we should share our knowledge to provide a better understanding of what it means and how it can affect you.
Most people really don’t bother themselves about their tax code, they just want to know how much they get paid.
This can either lead to you paying too much tax (believe me it does happen) or paying too little, this creates a debt burden which at times may occur years after the money has been spent (that’s even more annoying!)
HMRC confirms that currently 8 million people underpay or overpay their tax each year. Two-thirds of these people (5.5 million) overpay tax, of which just over 50% are the lowest paid, earning under £15,000 a year.
What is the tax code?
The tax code is a set of numbers and or letters that employers or pension providers use to determine how much tax-free income you are entitled to in each tax year
Other adjustments to tax codes
HMRC can add your other work-related expenses, subscriptions, or charity gifts that you make during the year to increase your tax code so that you don’t overpay tax and have to claim refunds.
They can also reduce your tax code because of tax owed from previous years, dividend tax, benefits, etc. This allowance /code will then be distributed all throughout the year and used to reduce the tax paid each month.
HMRC can also divide your tax code between 2 jobs as long as you are a basic taxpayer, thereby giving relief to both sources of income.
Where to find information about your tax code
You normally receive a P800 form at beginning of the tax year explaining what is in your code. If you need to reduce the under or overpayment of the tax, from July 2017, HMRC agents are able to change your tax code as soon as there is a need to.
You can also have access to this information by setting up a personal tax account. To read about how to set up a personal tax account, Kindly click
To read more on how taxes are calculated in the Uk, kindly click