It is the amount of money a person can earn in a given tax year before paying income tax. For example, the Personal Allowance (PA) for the current tax year, 2023/24, is £12,570.
Why is it essential to use PA?
It would be best to utilise PA in a given tax year as you are not allowed to carry forward any unused amount, and you miss the opportunity to reduce your tax liability.
Can my partner transfer me their PA?
Yes, if your partner does not work or has an income lower than the Personal Allowance, they can transfer 10% of their PA to you via the Marriage Allowance. It will allow you to increase your PA and reduce your taxable income.
How can you ensure that you claim your PA in full?
Ensuring that you claim the maximum PA to verify your tax code is essential. Your tax code instructs your employer or pension provider on the amount of tax to withhold from your income. You will pay more tax than necessary if your tax code is incorrect and you miss out on your PA.
What if you have two jobs?
If you have two jobs, applying your PA to the one that pays the most is essential. It will reduce your tax liability and utilise the PA in the most tax-efficient way.
What is your advice for business owners?
If you own a business, you can pay your partner a salary to utilise their PA. As a result, you can increase your allowable expenses and reduce your taxable income.
Is PA accessible to non-residents of the United Kingdom?
PA is unavailable to non-residents of the United Kingdom who elect to pay tax on a remittance basis. A special tax regime exists for non-domiciled individuals residing in the United Kingdom.
PA is a vital aspect of income tax in the United Kingdom. You should ensure your tax code is correct and utilise your full PA to pay taxes no more than necessary. Please contact Peer Accountants at 0121 369 0695 or email email@example.com if you want more tax-saving tips.