What is a Personal Allowance?

The Personal Allowance is the amount of income that you can earn or receive before you have to pay Income Tax to HMRC. This applies regardless of whether you’re employed or self-employed.  

The standard yearly Personal Allowance is £12,570 (2024/25 tax year). The Personal Allowance decreases by £1 for every £2 of income you receive if you earn more than £100,000 a year. If your taxable income is £125,140 or more, you don’t get any Personal Allowance.  

You’ll also need to complete and file a Self Assessment tax return if your adjusted net income (i.e. your total taxable income before any Personal Allowances and less certain tax reliefs) is over £150,000 a year. 

Your Personal Allowance may be bigger if you claim Marriage Allowance or Blind Person’s Allowance (an extra amount of tax-free allowance). Marriage Allowance enables you to transfer £1,260 of your Personal Allowance to your husband, wife or civil partner, which reduces their tax by up to £252 in the tax year (or vice versa). To benefit as a couple, the lower earner must normally have income that is below their Personal Allowance. The higher earning partner must be a basic rate taxpayer. 

Although tax rates and bands differ between Scotland and other parts of the UK, the Personal Allowance is exactly the same. If you file a Self Assessment tax return, you will automatically receive your tax-free personal allowance when HMRC calculates your tax bill. If you are an employee who is paid through a company payroll, your Personal Allowance will also be applied before deductions from your salary are made.