What is Personal Allowance?
The amount of income you can earn each year before paying income tax — currently £12,570.
Key Facts
- ✓ £12,570 for 2025/26 (frozen since 2021/22)
- ✓ Reduced by £1 for every £2 earned above £100,000
- ✓ Fully withdrawn at £125,140 income
- ✓ Standard tax code: 1257L
- ✓ Freeze expected to continue until at least 2027/28
Current Rates (2025/26)
- ▸ Personal Allowance: £12,570
- ▸ Taper starts: £100,000
- ▸ Fully withdrawn: £125,140
Explanation
The Personal Allowance is the amount of income you can earn in a tax year without paying any income tax. For the 2025/26 tax year it is set at £12,570. This allowance has been frozen at this level since 2021/22, with the freeze expected to last until at least 2027/28 — a policy known as fiscal drag. The Personal Allowance applies to all UK taxpayers regardless of whether they live in England, Wales, Scotland, or Northern Ireland. However, it is reduced by £1 for every £2 of income above £100,000, meaning it is completely withdrawn once income reaches £125,140. This taper creates an effective marginal tax rate of around 60% in the £100,000 to £125,140 income range. Your Personal Allowance is reflected in your tax code — the standard code 1257L represents a £12,570 allowance.
Try the calculator: Use our free calculator to see how personal allowance affects your finances.
Salary Calculator →Other Glossary Terms
The system HMRC uses to collect income tax and National Insurance directly from employee wages.
National InsuranceA UK tax on earnings and self-employed profits that funds the state pension, NHS, and benefits.
Basic Rate (20%)The 20% income tax rate applied to taxable income between £12,571 and £50,270.
Higher Rate (40%)The 40% income tax rate applied to taxable income between £50,271 and £125,140.
Additional Rate (45%)The 45% income tax rate applied to taxable income above £125,140.
Stamp Duty Land Tax (SDLT)A tax paid when buying property or land in England and Northern Ireland.
Frequently Asked Questions
What does personal allowance mean?
The amount of income you can earn each year before paying income tax — currently £12,570.
Why does personal allowance matter?
Understanding personal allowance helps you make informed financial decisions and ensure you pay the correct amount of tax. Getting it wrong could mean overpaying or underpaying HMRC, which may result in penalties or missed savings. Use our calculators to see how personal allowance applies to your personal situation.
Where can I find more information about personal allowance?
HMRC publishes official guidance on GOV.UK for all UK tax topics. For a quick overview, our glossary entries are written in plain English and updated each tax year. You can also use our free online calculators to model different scenarios and understand how changes to your income, deductions, or allowances affect your overall tax position.