In the UK tax system, Personal Allowance' is the level above which income tax is levied on an individual's annual income. A person who receives less than his/her personal allowance in taxable income (such as earnings and some benefits) in a given tax year does not pay income tax; otherwise, tax must be paid according to how much is earned above this level. Certain residents are entitled to a larger personal allowance than this. These include the over 65s (followed by an increased allowance for over 75s), blind people, and married couples where at least one person in the marriage (or civil partnership) was born before 6 April 1935.
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Married Man's allowance was the allowance for Married couple, co-habitees weren't eligible. The allowance was given at the man's highest rate of tax. During the early 1990s the then Chancellor Norman Lamont overhauls the allowance and introduced the 10% allowance, which meant that all men had the same amount of money in their pocket, irrespective of highest tax rate. The whole allowance was scrapped in April 2000 with the exception of people married or in civil partnerships where one spouse was born before 6th April 1935.
The Chancellor announced in May 2008 that the 2008-09 personal allowance would be increased by £600 from £5435 to £6035.[1] This was done to help low-income tax-payers affected by the abolition of the 10% starting rate of income tax. At the same time the threshold at which someone starts to pay higher rate tax was reduced by £600, so that higher rate tax payers would not benefit from the change. The change was implemented in September 2008. The enhanced personal allowance will be increased in 2009-10 to £6475.[2]
As part of the Coalition Agreement it was agreed the personal allowance for income tax should be increased to £10'000 in order to help take many low earner out of the tax threshold. This was part of a bigger part of reforms of the tax and welfare system to help simplify matters. This will result in the biggest increase to the allowance, which in fact double the allowance allowed.
On 22 June 2010, The Chancellor (George Osborne) upped the Personal Allowance by £1000, in his Emergency Budget, making it £7475 for the 2011-12 tax year. os[3] During 2011 Budget second phrase took place to rise the allowance by £630 to £8,105 in April 2012 [4]