Personal Allowance

What is the Personal Allowance?

The personal allowance is the amount of income you can receive in a tax year before you start paying income tax . For the 2024/25 and 2025/26 tax years, the standard personal allowance is £12,570.

This means the first £12,570 of your taxable income is tax-free. Income above this amount is taxed at the applicable income tax rates.

The personal allowance has been frozen at £12,570 since April 2021 and is set to remain at this level until at least April 2028 under the government’s fiscal policy.

Income Tax Rates and Bands (2025/26)

Once your income exceeds the personal allowance, it is taxed at graduated rates:

These bands apply to England and Northern Ireland. Scotland has its own income tax rates and bands.

Personal Allowance Taper

If your adjusted net income exceeds £100,000, your personal allowance is reduced by £1 for every £2 of income above this threshold. This means the personal allowance is completely eliminated once income reaches £125,140.

How the Taper Works

The 60% effective marginal rate between £100,000 and £125,140 arises because for every additional £2 earned, you lose £1 of personal allowance (which would have been tax-free), plus you pay 40% tax on the additional income. This creates an effective rate of 60% on income in this band.

Strategies to Preserve the Personal Allowance

Individuals with income near the £100,000 threshold may be able to preserve their personal allowance by:

• Making pension contributions (which reduce adjusted net income)
• Donating to charity through Gift Aid (which extends the basic rate band)
• Using salary sacrifice arrangements for pension contributions or other qualifying benefits

A pension contribution of £2,000 by someone earning £102,000 would restore £1,000 of personal allowance, saving £400 in tax on top of the relief on the contribution itself.

Marriage Allowance

The marriage allowance allows one spouse or civil partner to transfer £1,260 (10% of the personal allowance) to the other, provided:

• The transferor earns less than the personal allowance (£12,570)
• The recipient is a basic rate taxpayer (income between £12,571 and £50,270)
• They are married or in a civil partnership

Tax Saving

The recipient gains an additional £1,260 of tax-free income, saving £252 per year (£1,260 × 20%).

The marriage allowance can be backdated for up to four tax years, meaning eligible couples who have not yet claimed could receive up to £1,260 in backdated refunds.

How to Claim

Apply through the HMRC online service at GOV.UK. Once set up, the transfer continues automatically each year until cancelled.

Blind Person’s Allowance

Individuals registered as blind (or severely sight-impaired) with their local authority receive an additional tax-free allowance of £3,070 (2025/26) on top of the standard personal allowance. This can also be transferred to a spouse or civil partner if unused.

How the Personal Allowance Affects Your Tax Code

Your personal allowance is reflected in your tax code , which tells your employer how much tax-free income to allocate through PAYE .

The standard tax code for someone with only the personal allowance and no adjustments is 1257L. The number represents the personal allowance divided by 10 (£12,570 ÷ 10 = 1257), and the letter L indicates a standard allowance.

If HMRC adjusts your personal allowance — for example, to include flat rate expenses or to account for untaxed income — your tax code number will change accordingly.

Personal Allowance for Non-Residents

Most UK residents are entitled to the personal allowance regardless of nationality. Non-residents may also claim it if they are:

• A citizen of the European Economic Area (EEA) or Switzerland
• A Crown employee serving overseas (or their spouse/civil partner)
• A resident of a country with a double taxation agreement that provides for the allowance

Non-residents who do not fall into these categories receive no personal allowance and are taxed on their UK income from the first pound.

Personal Allowance and State Pension

The state pension counts as taxable income and uses up part of your personal allowance. For the 2025/26 tax year, the full new state pension is approximately £11,973 per year, leaving only around £597 of unused personal allowance for other income.

This means pensioners with even modest additional income from private pensions, savings, or part-time work will begin paying income tax.

Tax-Free Income Outside the Personal Allowance

Several other allowances and reliefs provide tax-free income on top of the personal allowance:

These allowances operate independently and can significantly increase the total amount of tax-free income available.