Question
Can you please advise if the personal tax allowance is still granted to ALL individuals including persons of non working age. This is in connection to interest earned on capital sums in investment accounts.Answer
All UK residents enjoy a personal income tax allowance regardless of age. So they can receive taxable income up to that amount during the tax year without having to pay any income tax.
Everyone, including children, currently enjoys a £6,475 personal allowance up to age 65. This rises to £9,490 for those between 65-74 and £9,640 for those aged 75 and over. However, these higher age allowances are reduced by £1 for every £2 of income exceeding £22,900, subject to not falling below the standard £6,475 allowance.
High earners will also see their standard allowance reduced by £1 for every £2 of income above £100,000.
If you're eligible for the higher age allowance but worried you'll lose out due to your income exceeding £22,900 then holding savings and investments within Individual Savings Accounts (ISAs) might help as income from these does not count towards the £22,900 figure.
At the other end of the age scale personal allowances mean very few children end up paying income tax on savings or investments. However, parents should beware that if the annual interest/income on money they give their child exceeds £100 a year per parent, then the parent is liable to tax on that income, not the child.
This rule is intended to stop a tax loophole whereby parents hold money in their child's name to avoid tax. However, it doesn't apply to gifts from anyone else, e.g. grandparents.
Tax on investments gains is simpler. All UK residents currently enjoy a £10,100 allowance with gains in excess of this taxed at either 18% or 28%.
Can you please advise if the personal tax allowance is still granted to ALL individuals including persons of non working age. This is in connection to interest earned on capital sums in investment accounts.Answer
All UK residents enjoy a personal income tax allowance regardless of age. So they can receive taxable income up to that amount during the tax year without having to pay any income tax.
Everyone, including children, currently enjoys a £6,475 personal allowance up to age 65. This rises to £9,490 for those between 65-74 and £9,640 for those aged 75 and over. However, these higher age allowances are reduced by £1 for every £2 of income exceeding £22,900, subject to not falling below the standard £6,475 allowance.
High earners will also see their standard allowance reduced by £1 for every £2 of income above £100,000.
If you're eligible for the higher age allowance but worried you'll lose out due to your income exceeding £22,900 then holding savings and investments within Individual Savings Accounts (ISAs) might help as income from these does not count towards the £22,900 figure.
At the other end of the age scale personal allowances mean very few children end up paying income tax on savings or investments. However, parents should beware that if the annual interest/income on money they give their child exceeds £100 a year per parent, then the parent is liable to tax on that income, not the child.
This rule is intended to stop a tax loophole whereby parents hold money in their child's name to avoid tax. However, it doesn't apply to gifts from anyone else, e.g. grandparents.
Tax on investments gains is simpler. All UK residents currently enjoy a £10,100 allowance with gains in excess of this taxed at either 18% or 28%.
Read this Q and A at http://www.candidmoney.com/questions/question351.aspx
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