Almost everyone in the UK can earn £12,570 before paying a penny of income tax. Here is how the Personal Allowance works in 2025/26, who keeps it, and who quietly loses it.
The Personal Allowance is the single most important number in the UK tax system, and for the 2025/26 tax year it sits at £12,570. That is the slice of income you can earn before income tax applies at all. Almost everyone who lives and works in the UK gets it, yet it is also one of the most misunderstood figures, partly because it has been frozen for years and partly because high earners lose it without always realising why.
Because the allowance has been frozen at £12,570 since the 2021/22 tax year, and the freeze is set to continue until at least April 2028, more people are being dragged into paying tax, and into higher tax bands, as wages rise but the threshold stands still. This is the phenomenon known as fiscal drag, and it is the quiet reason your tax bill can grow even when the headline rates never change.
The Personal Allowance applies to your total taxable income, not to a single source. If you have a salary, a bit of freelance income and a small pension, they are added together, and the first £12,570 of that combined figure is tax-free.
It is worth being precise about what counts. The allowance applies to:
Savings interest and dividends sit slightly apart. They have their own separate allowances (the Personal Savings Allowance and the Dividend Allowance) that stack on top of the Personal Allowance, although the Personal Allowance can still be set against them if you have unused allowance left over. For a full picture of how the bands above the allowance work, the 2025/26 income tax thresholds page sets out the basic, higher and additional rate boundaries that sit directly above £12,570.
For an English, Welsh or Northern Irish taxpayer, the structure above the Personal Allowance in 2025/26 looks like this:
| Band | Taxable income (2025/26) | Rate |
|---|---|---|
| Personal Allowance | £0 to £12,570 | 0% |
| Basic rate | £12,571 to £50,270 | 20% |
| Higher rate | £50,271 to £125,140 | 40% |
| Additional rate | Over £125,140 | 45% |
Scotland is different above the allowance. Scottish taxpayers still receive the same £12,570 Personal Allowance, but they then pay tax under six Scottish bands (starter 19%, basic 20%, intermediate 21%, higher 42%, advanced 45% and top 48%). The allowance itself is identical; only what happens above it changes. This is why a Scottish taxpayer and an English taxpayer on the same salary can have very different tax bills despite an identical tax-free amount.
Most UK residents automatically receive the full Personal Allowance. You do not apply for it; HMRC builds it into your tax code. There are, however, three groups whose position differs.
This is the big one, and it catches more people every year. Once your adjusted net income passes £100,000, the allowance is withdrawn at a rate of £1 for every £2 of income above the threshold. By £125,140 it has gone entirely.
Whether a non-resident keeps the allowance depends on nationality and the relevant double taxation treaty. UK and EEA nationals generally retain it, as do residents of various countries with which the UK has a treaty, but it is not automatic for everyone living abroad.
If you transfer part of your allowance to a spouse, your own allowance falls by £1,260 and theirs effectively rises by the same amount. We cover this below.
The taper deserves its own explanation because of the strange effective rate it produces. For every £2 you earn above £100,000, you lose £1 of Personal Allowance. That lost £1 then becomes taxable at 40%. So on top of the 40% you already pay on the income itself, you pay tax on the slice of allowance you just lost. The result is a marginal rate of 60% on income between £100,000 and £125,140.
Imagine Sara earns £110,000. She is £10,000 over the £100,000 threshold. Her Personal Allowance is reduced by half of that excess, which is £5,000. So instead of £12,570, she now has £7,570 of tax-free income. The £5,000 of allowance she lost is taxed at 40%, costing £2,000, on top of the £4,000 of higher-rate tax on the £10,000 itself. That £10,000 of gross pay has effectively cost her £6,000 in tax, a 60% marginal rate.
The most effective response is usually a pension contribution. Because pension contributions reduce adjusted net income, putting £10,000 into a pension would bring Sara back down to £100,000, restoring her full allowance and unwinding the 60% trap. The salary tax calculator lets you model exactly where you fall, and the dedicated personal allowance taper guide walks through the 60% trap in more detail with several income scenarios.
For most employees and pensioners, the Personal Allowance is delivered automatically through PAYE in the form of a tax code. The standard code for 2025/26 is 1257L. The logic is simple: drop the final digit from £12,570 and you get 1257, while the L confirms a standard allowance with no unusual adjustments.
Your code changes when HMRC needs to account for something else. A company car or medical insurance reduces the code because the taxable value of those benefits eats into your allowance. Owing tax from a previous year does the same. A Marriage Allowance transfer changes the suffix to M or N. If your code looks wrong, it is worth checking, because an incorrect code means you are paying the wrong amount of tax every single payday.
You cannot give your entire allowance to someone else, but you can transfer a fixed slice of it. If you earn below £12,570 and your spouse or civil partner is a basic-rate taxpayer (earning between £12,571 and £50,270 in 2025/26), you can transfer £1,260 of your allowance to them through Marriage Allowance.
The maths is straightforward. The £1,260 transferred would otherwise have been taxed in the recipient's hands at 20%, so the saving is 20% of £1,260, which is £252 a year. The transferor must genuinely have allowance to spare; transferring it when you would have used it yourself simply moves the tax bill from one partner to the other with no net gain.
The freeze until April 2028 is doing real work. If the allowance had risen with inflation since 2021, it would be comfortably above £15,000 by now. Instead it is pinned at £12,570, which means each year a larger share of your income becomes taxable in real terms, and pay rises that merely keep pace with inflation can push you into the higher-rate band for the first time.
For self-employed sole traders, this matters in combination with Making Tax Digital, which begins phasing in from April 2026. Your quarterly updates report income and expenses through the year, and the Personal Allowance is applied when your final tax position is worked out at the end of the year. Knowing your allowance is fixed at £12,570 helps you forecast the tax you are setting aside as profits grow.
The Personal Allowance hasn't changed in years, but your tax bill probably has. That's fiscal drag doing its quiet work. Knowing exactly where £12,570 sits in your income is the first step to never overpaying.
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