Explaining tax allowances
Tax allowances can be referred as a part of the income earned by a person and is not taxable. Putting it other way, tax allowances are concessions provided by the government and can be used for reducing the taxable income of a person. However, the tax allowances are subject to various reasons that vary depending upon the age and personal circumstances.
Allowances against income tax
The different types of allowances against income tax include personal allowance and blind person’s allowance, allowing you to obtain that much income free from tax during any one tax year. Besides, there is also the married couple’s allowance that works as a reduction from the tax bill.
Types of allowances available
The different types of tax allowances available include:
- Personal Allowance (UK example)
This tax allowance type can be set against any kind of income for almost everybody. However, people with incomes above £100.000 get a lesser amount of allowance or no allowance at all. Generally, there are three amounts of personal allowance, but only the basic allowance is provided automatically:
- A standard amount for most people blow 65.
- A higher amount for people between 65-74 years of age and is obtainable for the whole tax year to anyone crossing the age of 65 years at any point during a tax year.
- The highest amount for people with an age of 75 years and above. This tax amount is also obtainable for the whole tax year to anybody reaching the age of 75 at any point during the tax year.
- Blind person’s allowance
The blind person’s allowance works in a manner similar to that of the personal allowance. It is generally a fixed amount which is set against the taxable income, thus allowing the receipt of that much free income in any single tax year.
- Married couple’s allowance
It is essential to live together as a married couple or civil partners with one of the partners being born before April 6, 1935. The married couple can apply to the tax office to share the minimum Married Couple’s Allowance between you or, if both partners agree, to transfer the minimum Married Couple’s Allowance, and might also be entitled to a Blind Person’s Allowance.
- Debt ratios
- Liquidity ratios
- Profitability ratios
- Asset management ratios
- Cash Flow Indicator Ratios
- Market value ratios
- Financial analysis
- Business Terms
- Financial education
- International Financial Reporting Standards (EU)
- IFRS Interpretations (EU)
- Financial software
Most WantedFinancial Terms
- Most Important Financial Ratios
- Debt-to-Equity Ratio
- Financial Leverage
- Current Ratio
- Interest Coverage Ratio (ICR)
- Solvency Ratio
- Break-even Point
- Debt Service Coverage Ratio
- Receivable Turnover Ratio
- Return On Capital Employed (ROCE)
Have 10 minutes to relax?Play our unique
Play The Game