Your personal tax allowance

Everyone who lives in the UK is entitled to a personal allowance. This is the amount of income you can receive each year without having to pay tax on it. Depending on your circumstances, you may also be able to claim certain other allowances.
There are three levels of personal allowance for 2007/2008 tax year:
•Basic rate, which is 5225 (with no income limit)
•age 65 to 74, which is 7550 (with an income limit of 20900)
•age 75 and over 7690 ( with an income limit of 20900).
It is important to bear in mind that if your income is over the income limit, the age related allowance reduces by half of the amount (£1 for every £2) you have over that limit, until the basic rate allowance is reached (you’ll always get the basic allowance, whatever the level of your income).
If you become 65 or 75 during the year to 5 April 2008, you are entitled to the allowance for that age group.

So if, for example, you are 69 and have an income of £22,000( £1100 over the limit) your age-related allowance would reduce by £550 to £7,000.

If HM Revenue & Customs (HMRC) knows your age you should get the personal allowance automatically. But bear in mind they won’t know your age unless you’ve told them or shown your date of birth on a tax return or claim form. If you haven’t done this already and you are 65 or over you need to contact your Tax Office.
If you want to claim a tax refund because you didn’t use your personal allowance (or for any other reason), you need to do so within five years from the 31 January following the end of the tax year concerned. Taxfile in South London can help you claim the overpaid tax . Their tax advisers deal with the Inland Revenue on your behalf , taking the strain off you at a taxing time, making sure that you never pay more than your minimum tax liability, whether this be income tax, capital gains tax (CGT) or inheritance tax(IHT).