The Personal Allowance is the amount of income you can earn each tax year in the UK before you start paying income tax. It applies to almost everyone, regardless of whether you are employed, self-employed, or receiving pension income, and understanding it is fundamental to understanding your overall tax position.
How much is the Personal Allowance?
The current standard Personal Allowance is £12,570 per tax year (check gov.uk for the current figure, as it is reviewed in each Budget). This means the first £12,570 of your income is completely free from income tax — only income above this threshold is taxed, starting at the basic rate. See our full guide to income tax bands for how tax is calculated above this threshold.
Does everyone get the same Personal Allowance?
Most UK taxpayers receive the standard Personal Allowance, but there are important exceptions. If your income exceeds £100,000, your Personal Allowance is gradually reduced — you lose £1 of allowance for every £2 you earn above this threshold, meaning the allowance is fully removed once income reaches £125,140. This creates a particularly high effective tax rate on income within this band, since you lose both the allowance and pay higher rate tax on the same pound of income.
You may also be entitled to a higher Personal Allowance through Marriage Allowance if your spouse or civil partner transfers part of their unused allowance to you — see our guide to Marriage Allowance for full eligibility details.
How does the Personal Allowance apply to different income types?
The Personal Allowance applies to your total taxable income across all sources combined — not separately to each source. If you have employment income and rental income, for example, both are added together and the Personal Allowance is applied to the combined total, not to each income stream individually.
Some forms of income do not count towards using up your Personal Allowance, including ISA income (which is entirely tax-free) and certain state benefits.
What if you do not use your full Personal Allowance?
If your income is below the Personal Allowance, you simply pay no income tax. Unused Personal Allowance cannot generally be carried forward to future tax years for your own use. However, if you are married or in a civil partnership and have unused allowance, you may be able to transfer some of it to your partner through Marriage Allowance, provided they are a basic rate taxpayer.
How is the Personal Allowance applied through PAYE?
If you are employed, your Personal Allowance is built into your tax code, which tells your employer how much tax-free income to apply before deducting tax from your pay. The most common tax code, 1257L, reflects the standard Personal Allowance of £12,570. If your tax code looks different, it may reflect adjustments for benefits, additional income, or the high income taper — it is worth checking your tax code through your personal tax account at gov.uk if you are unsure why it differs from the standard code.
Self-employed and the Personal Allowance
If you are self-employed, the Personal Allowance is applied when you calculate your tax liability through self-assessment — see our guide to self assessment tax returns for how this works in practice.