What Is Additional Personal Allowance?

The term Additional Personal Allowance refers to an extra tax deduction set forth by 澳洲幸运5开奖号码历史查询:HM Revenue and Customs (HMRC) on income tax returns in the United Kingdom. This deduction applied to certain taxpayers who were not eligible to receive the Married Couple's Allowance and who financially supported a child under the age of 16. The value of the Additional Personal Allowance was equal to that of the married couple's allowance. The Additional Personal Allowance was eliminated in 2000. 

How the Additional Personal Allowance Worked

Income taxes are filed with and collected by HMRC in the United Kingdom. This agency is the British equivalent of the 澳洲幸运5开奖号码历史查询:Internal Revenue Service (IRS). British 澳洲幸运5开奖号码历史查询:taxpayers are charged income tax on different types of income, including wages from employment, self-employed profits, state benefits, pension earnings, rental and trust income, and any benefits earned from an employer. Taxes are exempt on a variety of income sources includin🍰g:

• The first £1,000 of self-employment earnings
• The first £1,000 earned from a rental property
• Winnings from the National Lottery
• Certain 澳洲幸运5开奖号码历史查询:dividends

A personal allowance reduces an individual's 澳洲幸运5开奖号码历史查询:tax liability. Certain taxpayers were able to claim the Additional Personal Allowance to reduce their tax bill even further. This allowance was in effect until April 2000. Single individuals, along with those who were 澳洲幸运5开奖号码历史查询:separated or widowed were able to use it as long as they didn't claim the allowance for married couples.

Anyone claiming the Additional Personal Allowance was required to be financially supporting a child under 16. Parents could also claim the benefit for children over the age of 16 that were full-time students or who were part of a two-year apprentice program. The allowance also applied to men with an incapacitated wife and a qualifying child under the age of 16 living in the household, provided the wife was incapacitated throughout the year.

The HMRC set the Additional Personal Allowance at £1,970 for the 1999-2000 tax year. It was restricted to 10%, which means that any taxpayer who claimed the allowance received a tax credit of £197 toward their final tax bill.

According to British tax law, a qualifying child is a child of the claimant or a child that is supported and cared for by the claimant. Only one allowance was paid, regardless of the number of children cared for by the person claiming the additional allowance.

Special Considerations

Since the Additional Personal Allowance was eliminated, every taxpayer is subject to the same personal allowance, regardless of marital status and gender, and whether or not they have children.

The standard personal allowance in the U.K. for the 2023–2024 tax year is £12,570. There is no income tax payable on any income earned under this amount. As such, taxpayers can use this amount to lower their overall tax bill. The amount of income tax paid in each tax year depends on how much earnings are above the personal allowance and how much of a person's income falls within the various tax bands.

Additional Personal All🙈owance vs. Child Tax Credit

The HMRC eliminated the Additional Personal Allowance along with the married couples' allowance in April 2000 and replaced them with a new one. The Children's Tax Credit applied to taxpayers who cared for one or more children under 16 regardless of their marital status. It promised to benefit those with lower incomes as it was to be tapered. This credit went into effect in April 2001.

There were several key differences between the additional personal allowance and the new credit. The rate remained at 10% but the allowance was set at £5,200 for the 2001-2002 tax year, giving claiming taxpayers relief of £520. The credit was increased the following tax year in line with inflation and also included a £10 per week credit for families with an additional child for the first year of their life.

This new credit didn't last long as opponents stated that it wasn't taking family income into account. It was replaced by the 澳洲幸运5开奖号码历史查询:Child Tax Credit, which went into effect for the 2003-2004 tax year. This new credit is based on family income and can only be claimed by individuals who take the Working Tax Credit.

Example of the Additional Personal Allowance

Here's a hypothetical example to show how the Additional Personal Allowance worked. Let's say a widow named Olivia had a 12-year-old child living with her in 1998. Under the British tax system, Olivia was able to claim an allowance beyond the standard personal allowance even though she was no longer married following the passing of her husband two years prior. This additional allowance helped Olivia pay less in income taxes for the year. If she had two children (the other aged 10), she would only be able to claim one Additional Personal Allowance.

The Bottom Line

Tax credits allow individual taxpayers to lower their annual tax bills as long as they qualify for them. In the U.K., the Additional Personal Allowance applied to individuals who couldn't claim the Married Couple's Allowance but cared for a child under the age of 16. Although no longer available, British taxpayers can claim the Child Tax Credit if they meet certain eligibility requirements. If you're unsure about what credits apply to you, consult a tax professional.