ACCA paper F6 UK Basic Income Tax computation | Personal allowance & Personal age allowance

Personal allowance

All individuals including children are entitled to a personal allowance to be set against net income

·         The amount for 2009/10 is £6475

·         The personal allowance is deducted from other income first, then savings, then dividend income

·         Unused PA is lost, it can’t be transferred to any other tax payer

Personal age allowance

·         Those aged 65-74 get a higher rate personal allowance of £9490

·         Those aged 75 and above get the highest rate of £9640

·         If the tax payer’s net income (after reliefs) is above £22900, there is a deduction in the age related allowance, calculated as follows:

Ø  50% × (net income-£22900)

Ø  The reduction can’t reduce the allowance to less than the minimum PA allowance of £6475