UK Personal Allowance 2025/26: Everything You Need to Know

The personal allowance is the amount of income you can earn each year without paying income tax. For 2025/26, it remains at £12,570 — frozen at this level since 2021/22 and set to remain frozen until at least April 2028. This guide explains everything you need to know.

What is the Personal Allowance?

The personal allowance is a tax-free amount that every UK resident is entitled to. You pay no income tax on the first £12,570 of your income in each tax year. It applies to all types of income: employment income, self-employment profits, rental income, and most other income sources.

Your personal allowance is communicated to your employer through your tax code. The standard tax code for 2025/26 is 1257L, where the numbers represent your allowance divided by 10 (1257 = £12,570) and the L indicates the standard personal allowance.

How the Personal Allowance Affects Your Tax Bill

On a £30,000 salary, without the personal allowance you would pay 20% income tax on the full amount: £6,000. With the personal allowance, you only pay tax on £17,430 (£30,000 − £12,570), reducing your tax to £3,486. That's a saving of £2,514 — directly because of the personal allowance.

When Does the Personal Allowance Reduce?

The personal allowance begins to reduce if your income exceeds £100,000. For every £2 you earn above £100,000, you lose £1 of personal allowance. By the time your income reaches £125,140, your personal allowance has been completely withdrawn.

This taper creates an effective marginal tax rate of 60% on income between £100,000 and £125,140. Here's why: for every £2 extra income in this range, you pay 40% tax on it (£0.80), plus you lose £1 of tax-free allowance which was worth 40% × £1 = £0.40. Total tax on £2 = £1.20, which is 60%.

The Personal Allowance Freeze: What It Means for You

The personal allowance has been frozen at £12,570 since April 2021 and is set to stay at this level until April 2028. With inflation pushing salaries higher, this "fiscal drag" means more people are being pulled into higher tax bands over time — without any nominal pay cut.

In real terms, the personal allowance has fallen significantly. Had it risen with inflation since 2021, it would be roughly £15,500 by 2025 — meaning UK workers are paying substantially more tax in real terms than they would have with an inflation-linked allowance.

How to Protect Your Personal Allowance

If your income is above or approaching £100,000, there are legitimate ways to protect your personal allowance:

• Pension contributions:Contributions to a registered pension scheme reduce your "adjusted net income" — the figure used to calculate personal allowance tapering. Making a £10,000 pension contribution when earning £110,000 brings your adjusted net income to £100,000, fully restoring your personal allowance and saving up to £5,028 in tax.
• Gift Aid donations: Charitable donations via Gift Aid also reduce your adjusted net income for this calculation.
• Salary sacrifice: Sacrificing salary for pension contributions (or other qualifying benefits) reduces your gross salary before the allowance taper is calculated.

Marriage Allowance

If you're married or in a civil partnership and one partner earns below the personal allowance, the lower earner can transfer 10% of their personal allowance (£1,260) to the higher earner. This reduces the higher earner's tax by up to £252 per year.

You can claim Marriage Allowance through HMRC and backdate it up to four years, potentially giving you a one-off refund of over £1,000.