PAYE10010 - coding: coding allowances and reliefs: age related allowances

The Independent Taxation (In) Handbook tells you how to decide whether an age related allowance is due and how to work out the amount

• Personal allowance at In365 onwards
• Married Couple's allowance at In415 onwards

In most cases where a reduced age related allowance is due the computer will work out the amount for you provided the right signals are on the record.

From 6 April 1999 the rate of relief for Married Couple's age related allowances is due at 10% and from 2000-01 onwards Married Couple’s allowance is only due if at least one spouse was born before 6 April 1935. On or after 5 December 2005 Married Couples and Civil Partners can claim the Married Couple’s allowance (MCCP) if at least one spouse or civil partner was born before 6 April 1935.

Note: You must not use the term 'MCCP' in correspondence or when you are speaking to a taxpayer or their agent. You must always refer to the 'Married Couple's allowance' when you are dealing with taxpayers and their agents.

The computer helps you with some parts of this work. To calculate the age related allowance(s) due the computer needs to know

• The relevant date(s) of birth - DOB / SDOB

And

• The Net Statutory Income (NSI) for the coding year - ESTINC

The correct age related allowance abbreviation will be used and the amount of reduced age related allowances will be calculated automatically in most cases when

• ESTINC is entered or amended and DOB / SDOB for a taxpayer of 65 or over is already on the record

Or

• DOB / SDOB for a taxpayer of 65 or over is entered and ESTINC is already on the record

Or

• Both ESTINC and DOB / SDOB for a taxpayer of 65 or over are entered at the same time or are already on the record

MCCP will not be automatically reduced when ESTINC is entered on the coding record, you will need to manually calculate any income reduced age related allowances and will need to remember that MCCP may require recalculation if the ESTINC is amended. In the first year of marriage any reduction in the amount of PAA or PAE because of their level of income also needs to be calculated manually.

When not to enter ESTINC

ESTINC appears on form P2 and can be a cause of unnecessary correspondence. There are some cases when it is not necessary to enter ESTINC.

As a general rule do not enter ESTINC if

• The taxpayer is entitled to the maximum amount of the allowance

Or

• The estimated NSI is such that the taxpayer is obviously due the minimum amount of the allowance and is unlikely to be due full or reduced age related allowances in the foreseeable future

In borderline cases you can enter the ESTINC and get the computer to calculate the allowance for you. If the age related allowances have been reduced to the minimum amounts and you do not want the figure of estimated income to appear on the coding notice you can delete the ESTINC entry.

However, it is not recommended that you do this if the ESTINC is within £1000 above the figure at which age allowance runs out, especially if the taxpayer or his wife will become 75 in the next few years. It is only worthwhile deleting the ESTINC if it is so high that the restoration of reduced age related allowances is highly unlikely.

When calculating ESTINC take into account any changes you know of from a return or otherwise. Note any increase in a public service or state pension.

For most cases, the computer will give the correct age related allowances at the Annual Coding Review. These will be based on the DOB / SDOB and the ESTINC if held.

The Annual Coding Memo will give you more details and tells you what to do with cases listed for review.

Year of marriage

If the total income for a year of marriage exceeds the statutory limit, you may have to restrict the allowance in two separate ways. Follow the special rules and examples in the Independent Taxation (In) Handbook at In450 onwards.