Allowances

An allowance is a reduction in taxation that the government will permit when a wage earner undertakes certain responsibilities. For example, where he provides for children or elderly relatives or where he undertakes to pay life insurance or superannuation (which is a payment towards his pension).

When the Inland Revenue (a branch of the government) have all this information, they can calculate the amount he has to pay. Example 6 shows the sort of calculation that is made.

Example 5

The following figures are given only as a sample of the various allowances; they will, of course, differ from person to person. They refer to a married man in 1964, with two young children, paying superannuation of Ј45 and Endowment Life Insurance of Ј35. Besides his income, he is receiving Ј12 in interest from bank deposits and Ј21 from Family Allowances.

i) Superannuation (Q of premium only) 35

ii) Personal allowance 340

iii) Children 230

iv) Life Insurance (f of premium only) 14

v) National Insurance 22

Total allowances Ј641

Deduct

Interest (from investments not taxed at source) 12

vi) Family allowances (J of receipts only) 16

Allowances to be set against pay Ј613

Notes

i) Superannuation is a deduction for a pension,

ii) A single man is allowed Ј220

iii) For a child under 11, Ј115. For a child 11 to 16, Ј140. For a child over 16, Ј165 if still studying or in training

iv) f of the premium paid may be counted as an allowance

v) For a person under 18 the allowance is Ј10 for girls and Ј12 for boys,

vi) Family allowances consist of a payment from the Government of Ј0-40 per week for the second child and Ј0-50 per week for each child thereafter.

The allowances and fractions mentioned in the table may vary from time to time and are reviewed annually by the Chancellor of the Exchequer.

Taxable income

In addition to the allowances above, two-ninths of a salary or wage is allowed free of tax. This is added to the amount that is tax free because of allowances and this total is subtracted from the total income to get the taxable income (see Example 6).

Standard rate and reduced rates of tax

The rates of tax for 1966-8 were as follows:

the first Ј100 was taxable at Ј0-20 in the pound, the next Ј200 was taxable at Ј0-30 in the pound, the balance was taxable at Ј0-41 in the pound.

The rate at which the balance is taxed is called the 'Standard Rate'.

<== попередня сторінка	\|	наступна сторінка ==>
INCOME TAX	\|	Tax deducted by employer

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