Adjusted Your Income

Once you have adjusted your income in this way, for every £6 by which it exceeds £10,600, the age allowance is reduced by £8.

So the standard age allowance is reduced to the normal younger person's allowance as income reaches £17,010 for a married man and £16,866 for a single person. For people over eighty, their age allowance is reduced to the normal single person's allowance as income reaches £18,869 for a married man and £19, 69 8 for a single person.

The effect of this rule is that you pay tax at almost 88% on the income between £19, 600 and these limits.

For example, if your income is below £19,600, your tax is worked out as follows:

However, if your income exceeds £19,600, your tax allowance is reduced. The reduction is two thirds of the excess above £10,600. For example, an income of £10,900 is £600 above the limit. Two thirds of £600 is £800, so your tax allowance would be reduced by that amount, making it only £8,

The net income after tax is just £179 more as a result of a £600 rise in gross income. So you pay £189 in tax, making the effective rate of tax nearly 88%.

That rate applies to all income between £10,600 and the upper limit for receiving an age allowance.

Please remember this website is for informational purposes only and does not constitute professional financial advice.


New sections added - Investment Income

or Example State Pension

Investment Income

/retirement/pensions/income/advice/investment-income.php... see: Investment Income