Basic tax allowance for couple

Nylontokyo

This is a very basic question,

What is the tax allowance for a young family?

I thought it was around 7K, but what is it exactly for both of us?

If my wife is earning about 7K and I have about 10K coming in do I pay tax on 100% of my earnings because she has used up all our allowance?


Also I know this is obvious but would be very grateful if someone could please explain the percentages. Is it 10% tax for the first how much over the allowance then 20% after that?

I am thinking about going self employed thats why I would like to know these things.

fengirl_2

Everyone is taxed independently, not as a family.
The basic personal allowancwe which everyone gets is 6475 this tax year. You and your wife both get this amount tax free and then pay tax at 20%. The 10% tax band has been abolished.

tyllwyd

The other thing to think about if you have a young family is working tax credit & child tax credit. If you claim these, they may be affected if you change the number of hours you work or if the amount you earn changes. (You can claim if you are self-employed, although the system is a bit clumsy.)

trevormax

Doesn't matter how much your wife earns or is taxed, you will still get a basic tax free allowance.

Being a couple will affect what tax credits you are entitled to though as this is based on your joint income.

Nylontokyo

fengirl wrote: »

Everyone is taxed independently, not as a family.
The basic personal allowancwe which everyone gets is 6475 this tax year. You and your wife both get this amount tax free and then pay tax at 20%. The 10% tax band has been abolished.

So if a couple seperate they can both get 6475 allowance each. But if they stay together they only have 1 6475 total?

shop-to-drop

If the couple are seperate or together they both have independent allowances.

fengirl_2

No, everyoner has the 6475 allowance, whether they are married, divorced, widowed, co-habiting or living alone. The income tax system does not take account of your domestic circumstances.

AzimScot

so how does it actually work? I thought I was on emergency tax after reading some other forms on google.

I called the tax office and they told me I am on tax code 647L which is standard tax code for April 2009/10 and I get taxed at 20% after earning £120 weekly and £640 per month. So basically if I only earned that amount I wouldn't get taxed at all until my 6475 ran out? is that right?

dzug1

AzimScot wrote: »

so how does it actually work? I thought I was on emergency tax after reading some other forms on google.

I called the tax office and they told me I am on tax code 647L which is standard tax code for April 2009/10 and I get taxed at 20% after earning £120 weekly and £640 per month. So basically if I only earned that amount I wouldn't get taxed at all until my 6475 ran out? is that right?

Not quite.

You don't pay no tax at all until you have earned £6475 and suddenly start paying at 20%. The £6475 allowance is spread pro rata throughout the year so that you don't suddenly start paying tax partway through the year.

That might have been what you were trying to say - if so apologies.

jamesd

It means that the first £124.42 a week of your earnings will be free of income tax. So if your weekly pay was £192.30 you'd pay income tax on 192.30 - 124.42 = £67.88. So 20% of that as basic rate tax would be £13.56 in income tax.

suso

Nylontokyo wrote: »

This is a very basic question,

What is the tax allowance for a young family?

I thought it was around 7K, but what is it exactly for both of us?

If my wife is earning about 7K and I have about 10K coming in do I pay tax on 100% of my earnings because she has used up all our allowance?


Also I know this is obvious but would be very grateful if someone could please explain the percentages. Is it 10% tax for the first how much over the allowance then 20% after that?

I am thinking about going self employed thats why I would like to know these things.

Basically, each person has a personal tax free allowance of 6475. And then you pay 20% tax on money earned above that amount.

So on your earnings of 10,000
you have a personal tax free allowance of 6475,
10,000 -6475 = 3525 taxable @ 20% = 705 £ tax is due from you

Your wife's earnings of 7,000
she has a personal tax free allowance of 6475
7000 - 6475 = 525 taxable @ 20% = 105 £ due from your wife.

National insurance is not included in the above as its a grey area for me.

There is no such thing as a married couples allowance for people of your age, so it doesn't matter whether you are married, co habiting or pass each other in the street occassionally, you are taxed individually.

The 10% taxband was abolished a couple of years ago, there is still a 10% rate for savings interest income, but this doesn't apply in your case as your earnings come first.

Your personal allowance can be affected by things like company cars or commission so the figures of 6475 might not be precise in your case, but if you look at your payslip and it says 647L in the tax code then you can use the figure of 6475 ok. There is a higher rate band of 40%, but to be eligible for that you need to be earning individually over 43,000 so it doesn't apply in your situation