What are Tax Allowances?

Tax allowances refer to designated portions of income that individuals can earn without being subject to personal income tax. These allowances are established to provide taxpayers with relief by exempting a certain amount of their earnings from taxation. Essentially, they serve as thresholds beyond which income becomes taxable. For instance, if an individual's income falls within the designated tax allowances, they are not obligated to pay personal income tax on that portion of their earnings. 

However, any income exceeding these allowances is subject to taxation according to the prevailing tax rates. Employers typically implement these allowances in accordance with applicable regulations, such as collective agreements, work regulations, employee contracts, or internal policies, when determining compensation and benefits for their employees.