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

Identify the personal allowances available in 2009/10, to the following individuals:

Tax payer	Date of birth	Net income £
Vera	June 4, 1936	17000
Agatha	March 15, 1933	24000
Henry	August 20, 1923	25000
Leon	September 7, 1941	29000

ACCA paper F6 UK Basic Income Tax computation | Personal allowance & Personal age allowance | example 2

Calculate the age allowance in the following situations.

At the end of 2009/10:

·         Dennis will be 71 and has a net income of £23750

·         Nora will be 90 and has a net income of £25400

·         Peter will be 80 and has a net income of £30900

Solution

	Dennis	Nora	Peter
Age at the end of tax year:	71	90	80
	£	£	£
Personal age allowance Less: Restriction 50% × (23750-22900)                                50% × (25400-22900)                                50% × (30900-22900) Personal age allowance	9490 (425) 9065	9640 (1250) 8390	9640 (3165) 6475

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