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Personal Allowances
Everybody is entitled to what are called personal allowances, on which tax is not payable. The amounts of these allowances are set in each annual budget. For the tax year 2000/81 they were set as follows.
Single person £1,375
Married couple £2,145
Married woman's earnings allowance £1,375
So the allowance for a married couple, when the wife does not work, is £2,145. If the wife is also in paid employment a further allowance against her income of up to £1,375 is made, but limited to the actual amount she earns. Normally, of course, both incomes of a married couple are assessed to tax jointly.
The above levels of personal allowances are intended only for purposes of illustration. They are likely to be increased each year to keep pace with inflation.
Other allowances
As well as personal allowances certain other reliefs may be claimed in relevant circumstances. These rates, too, are liable to change, but in 2000/81 they included the following.
For single-handed responsibility for children £770
For sole responsibility for dependent relative
if claimant a man £100
if claimant a woman £145
For a housekeeper £100
For reliance on daughter or son's services £55
Blind person £180
Age allowance (over 65)
single person £1,820 maximum
married couple £2,895 maximum
(in lieu of personal allowances above)
The age allowance is abated by £2 for every £30 of taxable income exceeding £5,900. Thus if taxable income exceeds £6,567.50 (for a single person) or £7,025 (for a married couple) there is no benefit from claiming this allowance.
Your allowances are deductible from taxable income to arrive at a figure for net taxable income. The actual tax due is then calculated as a percentage of this.
The Budget
Tax rates of all kinds can be changed by the government whenever it likes, provided the necessary legislation is passed by Parliament. In practice the rates of most taxes are set in the government's annual budget which is announced in the spring. The budget is, of course, only a set of proposals by the Chancellor of the Exchequer. They are usually incorporated in the subsequent Finance Bill, but sometimes are subject to amendment before they receive the approval of Parliament and become the Finance Act.
Taxes determined by the Finance Act apply only to a single year, called the 'tax year'.... see: The Budget