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Personal Allowance Credits (PAC) have been introduced as a way of providing a cash payment to people whose income is below a specified amount. For a single person the income limit has been set at £9,300 and for married couples the limit is £18,600 respectively. As well as a maximum income level, there are a number of other conditions that must be met in order for a person to qualify for a PAC payment.
The income submitted on the income tax return for the previous tax year will be automatically used to calculate your entitlement and will form the basis of your claim. If you do not wish to receive an automatic PAC payment please advise the Income Tax Division in writing.
Apart from the maximum amount of income you can receive, there are two other conditions that you must meet in order to be eligible for a PAC.
You must have been 18 years of age or over at the start of the year of assessment for which you are making the claim. The year of assessment runs from 6 April to the following 5 April.
If your 18th birthday is during a year of assessment, you are not eligible for a PAC for that year.
You must have been resident in the Isle of Man for the full year of assessment for which you are making a PAC claim.
If you move to the Island, or leave permanently during a year of assessment, you are not eligible for a PAC for that year.
From the tax year commencing 6 April 2010, individuals who are in full-time education, individuals serving a custodial sentence for the whole of the year and individuals whose spouse/civil partner has their income tax liability capped, will no longer be eligible to receive a PAC.
Jointly assessed couples
If you are jointly assessed with your spouse/civil partner only one of you must meet the minimum age and residency conditions in order for you both to be eligible for a PAC. If you marry/enter a civil partnership in a year of assessment, you and your spouse/civil partner will be treated as single for that year and so will be considered separately for PACs.
The residency condition will not apply in cases where a person dies during the year of assessment provided they were resident from the start of the assessment year and remained resident up to the date of their death. The PAC eligibility will be based on the income received up to the date of their death, providing all other conditions are met.
PACs are intended to benefit people whose gross income is below the level of the personal allowance. In order to calculate your gross income, income that is not usually subject to income tax but which can nevertheless significantly improve your financial situation, must be included with the income that is subject to income tax. Your gross income is the figure that will be used to establish your eligibility for a PAC.
For payments made in respect of the tax year commencing 6 April 2009 onwards, the deduction of pension scheme contributions in determining gross income for the payment is removed.
The maximum PAC is £500 and this will be paid to all claimants whose gross income is below £9,300(Low Income Limit).
If you are jointly assessed with your spouse/civil partner, the maximum income limit and maximum PAC are doubled. It doesn't matter whether one partner's gross income exceeds £9,300, providing the combined total of both is not more than £18,600.
If you are eligible for a PAC based on the information submitted on your annual return, the Assessor will issue a Personal Allowance Credit Notice and it will be paid by cheque shortly after the issue of the Notice.
Please note - If you do not submit your annual income tax return, you will not automatically be entitled to a PAC.
Other Important Points to Note
Personal Allowance Credit Payments and Other Tax Debts
If you are eligible for a PAC but also have outstanding arrears of tax (including Class 4 National Insurance Contributions) the PAC will be offset against these arrears before the balance, if any, is paid to you.
Right of Appeal
All PAC Notices are subject to the normal appeals process. You are entitled to appeal against a PAC if you consider it to be incorrect. To do so, you should write to the Income Tax Division within 30 days of the date of the Personal Allowance Credit Notice setting out the reason why you consider it to be wrong. If agreement cannot be reached the appeal will be listed for hearing before the Income Tax Commissioners.
If the Assessor becomes aware that a PAC payment has been made incorrectly, he will issue a revised Personal Allowance Credit Notice. The amount overpaid will be collected in the same way as assessed income tax.
For frequently asked questions relating to PACs, click here