PAYE11110 - Coding: codes: how they are used and calculated: allowances and reliefs - how to calculate

The table below shows allowances and reliefs and how they are calculated, with links to further guidance on the topic from within this Manual.

P202: allowances

Description used on coding notices Circumstances Allowance or adjustment
Job Expenses Expenses other than the flat rate and professional subscriptions Allow whole amount of allowable expenses.PAYE130050 
Flat Rate Expenses Flat rate expenses as listed at EIM32712 Allow whole amount of allowable expenses.See also EIM32726
Professional Subscriptions Fees and subscriptions to professional bodies and learned societies as in List 3 Allow whole amount of allowable fees and subscriptions.
Earlier Year’s Adjustments To give relief for expenses not already claimed for earlier in-date years Allow whole amount of allowable expenses which have not previously been given relief in either tax codes or end of year reconciliations.PAYE130050 
Payments towards a retirement annuity Payments under a pre-6 April 2006 retirement annuity contract that qualifies as a registered pension scheme Allow relief on payments where individual has relevant UK earnings and individual’s total contributions to all registered pension schemes do not exceed those earnings.See RPSM05101110 onwards.Relief is not due for payments after age 75.PAYE130025 
Higher rate tax relief on pensions you’re paying into Individual liable at:  
 
  • Basic rate
 Nil
 
  • Higher rate
  • Additional rate
 Calculate the amount of Gross pension payments falling within Higher rate and Additional rate bands. The relief is given as the difference between the basic and highest tax rate the customer is liable to.Allow relief on payments where individual has relevant UK earnings and individual’s total contributions to all registered pension schemes do not exceed those earnings.See RPSM05101110.Relief is not due for payments after age 75.PAYE130025 
Gift Aid Payments Individual liable at:  
 
  • Basic rate
 Nil
 
  • Higher rate
  • Additional rate
 Difference between the highest and basic rate on the portion of payments which are subject to higher and / or additional rate liability.PAYE130025 
  Note: Use Gift Aid for all qualifying payments under the Gift Aid scheme, including those made under a deed of covenant  
Concessional relief Use Concessional relief to give relief for gifts of listed shares or securities to charities made on or after 6 April 2001.Note: This allowance is not carried forward and can only be entered from 6 April in the year to which it relates Allow the market value of the shares or securities, plus incidental expenses on transfer, on the donation date, less any consideration or benefit given by the charity to the individual for them.PAYE130025 
Enterprise Investment Relief Use to give relief on shares issued after 31 December 1993 previously under the Business Expansion Scheme Relief due at 30 per cent in terms of tax, converted to an allowance based on individual’s estimated highest rate.PAYE130025 
  Also use to give relief on shares issued after 6 April 2012 under the Seed Enterprise Investment Scheme Relief due at 50 per cent in terms of tax, converted to an allowance based on individual’s estimated highest rate.PAYE130025 
Loan Interest Loans for:  
 
  • Purchase of plant or machinery (for example a car) used for purpose of employment
 Allow interest payable - restricted for any private use in case of plant or machinery
 
  • Purchasing ordinary shares in, or making a loan to, close companies or a stake in a partnership
 Allow interest payable
 
  • Any other purpose and bank overdraft or credit card interest
 Nil - but note that interest on a loan to purchase or improve property let at a commercial rent may be allowable in certain circumstances.PAYE130025 
Maintenance Payments Payments to spouses, civil partners or former spouses and payments made for children (provided former spouse or civil partner has not remarried), where: For all new and existing orders allow:
 
  • Either spouse or civil partner of the marriage was born on or before 5 April 1935
 Lesser of minimum amount of Married Couple’s Allowance or the amount payable in current yearPAYE130025 
 
  • Both spouses or civil partners were born on or after 6 April 1935
 Nil
 
  • Payments made to children
 For all new and existing orders , no relief is due
Your personal allowance On 5 April 2013 the individual will be aged: Allow:
 
  • Under 65
 Basic personal allowance
 
  • 65 but not more than 74
  • 75 and over
 Personal allowance for individuals aged 65 but not more than 74 or 75 and over, is higher than the basic, but is dependant on income limits. See ‘Income reduction of age-related allowances’ below. Where income is above these limits, the personal allowance is reduced by £1 for every £2 until it falls to the level of the basic personal allowance.PAYE10010 
  Notes:  
  1 From 6 April 2013 the age-related personal allowances will be frozen at 2012-13 rates.Individuals who reach their 65th birthday on or after 6 April 2013 will not be entitled to receive an increased personal allowance.  
  2 From 2010-2011 the personal allowance will be reduced for individuals with adjusted net income over £100,000.For those affected, their personal allowance will be reduced by £1 for every £2 that their income exceeds £100,000 until the personal allowance is reduced to Nil.The point at which the personal allowance is fully reduced will depend on the level of the personal allowance in the relevant year.Anyone with an adjusted net income below this amount will continue to get the full allowance.  
Married Couple’s Allowance
  • On 5 April the individual or his wife living with him, will be aged under 74 and the date of marriage is before 5 December 2005
 No allowance due
 
  • On 5 April the individual or his wife living with him, will be aged 75 or over and the date of marriage is before 5 December 2005
 Allow - Married Couple’s Allowance (75 and over). See ‘Income reduction of age-related allowances’ below.PAYE10010 
 
  • On 5 April the individual or their spouse or civil partner living with the individual, will be aged under 74 and the date of marriage or civil partnership is on or after 5 December 2005
 No allowance due
 
  • On 5 April the individual or their spouse or civil partner living with the individual, will be aged 75 or over and the date of marriage or civil partnership is on or after 5 December 2005
 Allow - Married Couple’s Allowance (75 and over). See ‘Income reduction of age-related allowances’ below. For the year of marriage, the allowance is reduced by 1/12 for each complete tax month before the date of marriage.PAYE10040 
Income reduction of age-related allowances If the individual’s net statutory income is more than the income limit for the current year, age-related allowances are reduced by £1 for every £2 of the excess, until the allowances are the minimum amounts. That is, the amount is equal to the basic personal allowance and minimum amount of Married Couple’s Allowance for the year.Note: The personal allowance taper does not affect the minimum amount of Married Couple’s Allowance therefore individuals with net adjusted income over £100,000 would continue to receive the minimum amount of Married Couple’s Allowance even though the personal allowance is tapered or reduced to NIL.  
Married Couple’s Allowance transferred to your wife In a couple where the husband or wife are aged 75 or over and the date of marriage is before 5 December 2005, the husband can transfer to his wife any Married Couple’s Allowance which he is unlikely to use in the current year.The transferred Married Couple’s Allowance is shown as a ‘W’ allowance in the wife’s current year coding. In the husband’s coding record it will show as Married Allowance Transferred.Include the relevant amount onto the wife’s coding record where it will show as Surplus Married Couple’s Allowance from husband.PAYE130025 
Married Couple’s Allowance from your husband Married Couple’s Allowance provisionally transferred to the wife.Note: ‘W’ allowances are not income reduced if the wife’s net statutory income exceeds the income limit. Allow the amount of ‘W’ allowance calculated from the husband’s record.PAYE130035 
Married Couple’s Allowance (Wife) Couple where either the husband or wife are aged 75 or over and the date of marriage is before 5 December 2005 and
  • The wife has elected to have half the Married Couple’s Allowance set against her income
     
    Or
  • The husband and wife have jointly elected fort he wife to receive the whole of Married Couple’s Allowance
 Allow half or whole of the minimum amount of the Married Couple’s Allowance (but not the age-related additions) to the wife.PAYE130025 
Blind Person’s Allowance The individual is a registered blind person.Note: If the individual is unlikely to use all of this allowance in the current year, the excess can be transferred provisionally to his/her spouse or civil partner. Allow:
  • The current year amount of Blind Person’s Allowance if the individual is a registered blind person
     
    And
  • The amount of the allowance transferred to the individual form his/her spouse or civil partner
Death, Sickness or Funeral Benefits   Allow:
Friendly Society Subscriptions Only the death portion of certain combined policies for sickness, disability or death is allowable.
  • ½ of that part of the payment which provides for death benefits
Trade Union Subscriptions Only the death or superannuation portion of the subscription is allowable.
  • ½ of the allowable portion of the subscription
Widows and Orphans  
  • Maximum allowable - payments £100 at basic rate
PAYE130025
  Net pay arrangement has not been extended by concession to the payments and the individual is liable at: Allow:
 
  • Basic rate
 Whole of allowable payments
 
  • Higher rates
 Half of the allowance payment
  Net pay arrangement has been extended by concession to the payments and the individual is liable at: Allow:
 
  • Basic rate
 Nil
 
  • Higher rates
 Deduct to restrict relief to tax at basic rate on half of the compulsory payment
  Note: From 6 April 2013 individuals will no longer be entitled to receive tax relief for these payments or subscriptions.  
Double Taxation relief Claimant liable at: Allow:
 
  • Basic rate
 Tax relief allowed for previous year grossed at the basic rate.Example:Tax relief £92Allow 100/20 X 92 = £460
 
  • Higher rates
 Tax relief allowed for previous year grossed at the highest rate of liability on all employments.Example:Tax relief £92Estimated highest rate 40 per centAllow 100/40 X 92 = £230PAYE130025 

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