{{Short description|Threshold for individual income tax in the UK}} {{Use dmy dates|date=January 2015}} {{Use British English|date=January 2015}}
In the UK tax system, '''personal allowance''', typically £12,570<ref name=tax_rates_and_personal_allowances>{{cite web|url=https://www.gov.uk/income-tax-rates|title=Income Tax rates and Personal Allowances|access-date=2025-08-27}}</ref> in tax year 2025-26, is the threshold above which income tax is levied on an individual's taxable income. Taxable income is money earned from employment, profits from self-employment, some state benefits, most pensions including state pensions, rental income, benefits from a job, income from a trust, and interest on savings.<ref>{{Cite web|url=https://www.gov.uk/income-tax|title=Income Tax: introduction|access-date=2025-08-27}}</ref> A person who has taxable income below their personal allowance in a given tax year does not pay income tax; otherwise, tax must be paid on income above personal allowance.
There is an additional blind person's allowance of £3,130.<ref>{{Cite web|url=https://www.gov.uk/blind-persons-allowance/what-youll-get|title=Blind Person's Allowance|access-date=2025-08-27}}</ref> The marriage allowance allows a person earning less than £12,570 to transfer £1,260 of personal allowance to a husband, wife or civil partner.<ref>{{Cite web|url=https://www.gov.uk/marriage-allowance|title=Marriage Allowance|access-date=2025-08-27}}</ref> Historical additional allowances for married couples<ref>{{Cite web|url=https://www.claimsadvisoryservices.co.uk/the-history-of-marriage-tax-allowance|title=The History of Marriage Tax Allowance|date=2023-12-05|access-date=2025-08-27}}</ref> and age related allowances for over-65s and over-75s<ref name=ARA>{{Cite web| url=https://researchbriefings.files.parliament.uk/documents/SN06158/SN06158.pdf|title=Age-related personal allowance|date=10 September 2019|access-date=2025-08-27|page=27}}</ref> and an allowance on mortgage interest<ref>{{cite web |title=The Income Tax (Interest Relief) Regulations 1982 |url=https://www.legislation.gov.uk/uksi/1982/1236/made |publisher=UK Government |access-date=11 September 2025}}</ref><ref>{{cite web |title=The Income Tax (Interest Relief) (No. 2) Regulations 1983 |url=https://www.legislation.gov.uk/uksi/1983/311/made |website=legislation.gov.uk |publisher=UK Government |access-date=11 September 2025}}</ref> have been phased out.
From April 2010 personal allowance is tapered for people earning over £100,000 a year: for every £2 earned above £100,000 the personal allowance is reduced by £1 until incomes above £125,140 have zero personal allowance.<ref name=tax_rates_and_personal_allowances/> The additional £2 of income and the £1 removed from the tax free allowance are taxed at 40%, resulting in £1.20 ((2 + 1) * 40%) tax being paid for every additional £2 of income, a marginal tax rate of 60% (1.20 / 2 * 100) on incomes between £100,000 and £125,140.
There are additional tax allowances on income from savings interest<ref>{{Cite web|url=https://www.gov.uk/apply-tax-free-interest-on-savings|title=Tax on savings interest|access-date=2025-08-27}}</ref> and on rental income for resident landlords.<ref>{{Cite web|url=https://www.gov.uk/rent-room-in-your-home/the-rent-a-room-scheme|title=Rent a room in your home|access-date=2025-08-27}}</ref> Earnings from capital gains,<ref>{{Cite web|url=https://www.gov.uk/capital-gains-tax|title=Capital Gains Tax: what you pay it on, rates and allowances|access-date=2025-08-27}}</ref> and dividends<ref>{{Cite web|url=https://www.gov.uk/tax-on-dividends|title=Tax on dividends|access-date=2025-08-27}}</ref> have different tax thresholds and are taxed at different rates to income tax. Individuals also pay National Insurance Contributions an additional tax on income (paid at different rates by employees and employers).
== Impact of tapering on marginal rates ==
The taper creates an unusual situation where income between £100,000 and £125,140 is taxed at a higher effective rate than income above £125,140. For employees, adding National Insurance contributions of 2% results in a combined marginal rate of 62% in this band.<ref name="commons-library">{{cite web |url=https://commonslibrary.parliament.uk/research-briefings/cbp-9186/ |title=Income tax: freezing the personal allowance and the higher rate threshold |publisher=House of Commons Library |date=2025 |access-date=2026-01-29}}</ref>
The number of taxpayers affected has grown significantly due to fiscal drag. The £100,000 threshold has remained unchanged since its introduction in April 2010, while earnings have risen with inflation.<ref name="rathbones">{{cite web |url=https://www.rathbones.com/en-gb/wealth-management/media-centre/news-and-comment/100k-tax-trap-to-hit-2m-taxpayers |title=£100k tax trap to hit 2.3m taxpayers by 2029 |publisher=Rathbones |date=November 2025 |access-date=2026-01-29}}</ref> According to HMRC estimates obtained via Freedom of Information request:
* 1.22 million taxpayers were affected in 2021–22 * 1.95 million taxpayers are projected to be affected in 2025–26 * 2.29 million taxpayers are projected to be affected by 2028–29<ref name="commons-library" />
The freeze on income tax thresholds, announced in 2021 and extended in the 2025 Budget until April 2031, has accelerated this trend.<ref>{{cite web |url=https://www.icaew.com/insights/tax-news/2025/nov-2025/budget-freeze-on-personal-allowance-extended |title=Budget: Freeze on personal allowance extended |publisher=ICAEW |date=November 2025 |access-date=2026-01-29}}</ref>
=== Interaction with childcare entitlements ===
For families with young children, the £100,000 threshold has additional significance beyond income tax. Adjusted net income above £100,000 disqualifies parents from:
* 30 hours free childcare (worth approximately £6,000 per child per year)<ref name="govuk-30hrs">{{cite web |url=https://www.gov.uk/30-hours-free-childcare |title=30 hours free childcare |publisher=GOV.UK |access-date=2026-01-29}}</ref> * Tax-Free Childcare (up to £2,000 per child per year)<ref name="govuk-tfc">{{cite web |url=https://www.gov.uk/tax-free-childcare |title=Tax-Free Childcare |publisher=GOV.UK |access-date=2026-01-29}}</ref>
For example, a parent earning £100,000 with two pre-school-age children retains their full personal allowance and qualifies for both 30 hours of free childcare (worth approximately £12,000 per year for two children) and Tax-Free Childcare (worth up to £4,000 per year for two children). If their income rises by just £500 to £100,500, they lose £250 of their personal allowance and become ineligible for both childcare schemes. The £500 gross pay increase, therefore, results in a net loss of at least £15,000 per year.<ref>{{cite web |url=https://app.savinhood.com/calculator?salary=100500&children=2,4 |title=UK Tax Calculator |publisher=Savin Hood |access-date=2026-01-29}}</ref>
=== Mitigation strategies ===
Taxpayers can reduce their adjusted net income below £100,000 to preserve some or all of their personal allowance. Common methods include:
* Making pension contributions, which reduce adjusted net income pound-for-pound<ref name="govuk-pension">{{cite web |url=https://www.gov.uk/tax-on-your-private-pension/pension-tax-relief |title=Tax on your private pension contributions |publisher=GOV.UK |access-date=2026-01-29}}</ref> * Salary sacrifice arrangements for pension contributions, which additionally save National Insurance * Gift Aid donations to charity, which extend the basic rate band
=== Scotland ===
Scottish taxpayers face a higher effective rate in this band due to Scotland's advanced rate of 45% (rather than 40%) applying between £75,001 and £125,140. Combined with the personal allowance taper, this creates an effective marginal rate of 67.5% before National Insurance.<ref>{{cite web |url=https://www.gov.scot/policies/taxes/income-tax/ |title=Income Tax |publisher=Scottish Government |access-date=2026-01-29}}</ref>
== History == {{expand section|date=December 2014}}
The trajectory of the value of the personal allowance in recent years, both in real terms and relative to earnings, is recorded by the Institute for Fiscal Studies.<ref name=taxallowancehistory>{{Cite web|url=https://ifs.org.uk/taxlab/taxlab-data-item/personal-allowance-over-time|title=Personal Allowance Over Time|publisher=IFS|accessdate=2024-07-27}}></ref> The allowance was raised significantly between April 2007 and April 2019, but has increased only slightly since, falling in real terms due to inflation, while (projected to 2027) remaining above the 2010 level.
UK personal allowance between 1981 and 2026
On 22 June 2010, the new Chancellor George Osborne, as part of the coalition deal which sought to increase the Personal Allowance to £10,000 from April 2015 per Lib Dem policy,<ref>{{cite news| url=https://www.telegraph.co.uk/finance/personalfinance/how-budget-affect-me/7746081/How-does-the-Budget-affect-me-Income-Tax.html | location=London | work=The Daily Telegraph | first=Emma | last=Wall | title=How does the Budget affect me? Income Tax | date=2010-05-21}}</ref> made the first increase of £1,000, making it £7,475 for the 2011-12 tax year.<ref name="EBudget">{{cite web|url=http://www.hmrc.gov.uk/budget2010/index.htm|title=Emergency Budget 22 June 2010|publisher=HM Revenue & Customs|accessdate=2010-06-25}}</ref> During the 2011 Budget, the allowance was raised by £630 to £8,105 from April 2012.<ref>{{cite web |title=Income tax: increases in the personal allowance since 2010 |url=https://commonslibrary.parliament.uk/research-briefings/sn06569/ |publisher=House of Commons Library |access-date=13 April 2026}}</ref> In 2013, George Osborne revised the plans to increase the Personal Allowance and bring forward the date at which it would reach the £10,000 target. This resulted in the allowance being raised to £9,440 from April 2013, before being increased to £10,000 from April 2014, a year earlier than originally planned.<ref name=taxallowance>{{Cite web|url=https://www.express.co.uk/news/uk/385688/Budget-2013-Personal-tax-allowance-rise-to-10-000-brought-forward-12-months|title=Budget 2013: Personal tax allowance rise to £10,000 brought forward 12 months|first=Dion|last=Dassanayake|date=20 March 2013|website=Express.co.uk}}</ref><ref>{{cite news| url=https://www.telegraph.co.uk/finance/budget/9161890/Budget-2012-Hidden-blow-in-raised-personal-tax-allowance.html | archive-url=https://web.archive.org/web/20120323111709/http://www.telegraph.co.uk/finance/budget/9161890/Budget-2012-Hidden-blow-in-raised-personal-tax-allowance.html | url-status=dead | archive-date=2012-03-23 | location=London | work=The Daily Telegraph | first=James | last=Hall | title=Budget 2012: Hidden blow in raised personal tax allowance | date=2012-03-22}}</ref><ref name=taxallow>{{cite news| url=https://www.telegraph.co.uk/news/politics/9944064/Budget-2013-Millions-of-workers-get-100-tax-cut.html | location=London | work=The Daily Telegraph | first=Rowena | last=Mason | title=Budget 2013: Millions of workers get £100 tax cut | date=2013-03-20}}</ref> In a series of increases personal allowance rose to £12,500 by April 2019. In the March 2021 budget Chancellor Rishi Sunak increased personal allowance to £12,570 for April 2021 but announced a freeze in all income tax thresholds thereafter until April 2026.<ref>{{Cite web|url=https://www.gov.uk/government/speeches/budget-speech-2021|title=Budget Speech 2021 |first=Rishi|last=Sunak|date=3 March 2021|website=gov.uk|access-date= 11 September 2025}}</ref> In November 2022 Jeremy Hunt extended the freeze in income tax thresholds to April 2028.<ref>{{Cite web|url=https://www.gov.uk/government/speeches/the-autumn-statement-2022-speech|title=The Autumn Statement 2022 speech |first=Jeremy|last=Hunt|date=17 November 2022|website=gov.uk|access-date= 11 September 2025}}</ref> In October 2024 the new Chancellor Rachel Reeves intended to continue with the freeze in personal tax thresholds until April 2028.<ref>{{Cite web|url=https://assets.publishing.service.gov.uk/media/672b9695fbd69e1861921c63/Autumn_Budget_2024_Accessible.pdf |title=Autumn Budget 2024 |date=6 October 2023|website=www.gov.uk|access-date= 11 September 2025 | page=44}}</ref>
==Married Man's allowance== '''Married Man's allowance''' was the allowance for a legally married couple. The allowance was given at the man's highest rate of tax. During the early-1990s, then-Chancellor of the Exchequer, Norman Lamont overhauled the allowance and introduced the 10% allowance,{{clarify|date=December 2014}} which meant that all men had the same amount of money in their pocket,{{clarify|date=January 2016}} irrespective of highest tax rate. The allowance was scrapped from April 2000, first being announced in then-Chancellor Gordon Brown's 1999 budget,<ref>{{cite news| url=http://news.bbc.co.uk/1/hi/business/6442161.stm | work=BBC News | title=Gordon Brown: A decade of Budgets | date=2007-03-18}}</ref><ref>{{cite news| url=https://www.telegraph.co.uk/finance/4061560/Married-couples-punished-by-tax-system.html | location=London | work=The Daily Telegraph | first1=Tom | last1=Whitehead | first2=Christopher | last2=Hope | title=Married couples 'punished by tax system' | date=2009-01-01}}</ref> with the exception of people married, or in civil partnerships (introduced in 2005) where one spouse was born before 6 April 1935.
==History of allowances==
{| class="wikitable" ! rowspan="2" | Year ! colspan="3" | Allowance (£) |- !| Age under 65 || colspan=2 |Age 65 & over |- |1976-77 || 735 <ref name="Hansard_1977">{{Cite web|url=https://api.parliament.uk/historic-hansard/commons/1977/feb/24/income-tax-allowances|title=income-tax-allowances|date=24 February 1977}}</ref> || colspan=2| 1,010<ref name="Hansard_1977"/> |- |1977-78 || 945 <ref name="Act_1977">{{Cite web|url=https://api.parliament.uk/historic-hansard/commons/1977/feb/24/income-tax-allowances|title=Finance (Income Tax Reliefs) Act 1977}}</ref> || colspan=2| 1,250<ref name="Act_1977"/> |- |1978-79 || 985 <ref name="budget_1979">{{Cite web|url=https://archive.margaretthatcher.org/doc02/F437D11B1C8A48DDB0CEA52B71AB83EA.pdf|title=1979 BUDGET EXPLANATORY TABLES}}</ref> || colspan=2| 1,300<ref name="budget_1979"/> |- |1979-80 || 1,165 <ref name="tax_history">{{Cite web|url=http://www.taxhistory.co.uk/Income%20Tax%20Allowances.htm|title=Historical Information on the UK Tax Regime. Historical Tax rates and Allowances}}</ref> || colspan=2| 1,540<ref name="tax_history"/> |- |1980-81 || 1,375 <ref name="tax_history"/> || colspan=2| 1,820<ref name="tax_history"/> |- |1981-82 || 1,375 <ref name="tax_history"/> || colspan=2| 1,820<ref name="tax_history"/> |- |1982-83 || 1,565<ref name="budget_82">{{Cite web|url=https://www.margaretthatcher.org/document/109500|title=Economy: 1982 Budget (Howe 4) | Margaret Thatcher Foundation|website=www.margaretthatcher.org}}</ref> || colspan=2| 2,070<ref name="budget_82"/> |- |1983-84 || 1,785<ref name="budget_83">{{Cite web|url=https://www.margaretthatcher.org/document/109500|title=Economy: 1983 Budget (Howe 5) | Margaret Thatcher Foundation|website=www.margaretthatcher.org}}</ref> || colspan=2| 2,360<ref name="budget_83"/> |- |1984-85 || 2,005<ref name="budget_84">{{Cite web|url=https://www.margaretthatcher.org/document/109501|title=Economy: 1984 Budget (Lawson 1) | Margaret Thatcher Foundation|website=www.margaretthatcher.org}}</ref> || colspan=2| 2,490<ref name="budget_84"/> |- |1985-86 || 2,205<ref name="budget_85">{{Cite web|url=https://www.margaretthatcher.org/document/109502|title=Economy: 1985 Budget (Lawson 2) | Margaret Thatcher Foundation|website=www.margaretthatcher.org}}</ref> || colspan=2| 2,690<ref name="budget_85"/> |- |1986-87 || 2,335<ref name="budget_86">{{Cite web|url=https://www.margaretthatcher.org/document/109503|title=Economy: 1986 Budget (Lawson 3) | Margaret Thatcher Foundation|website=www.margaretthatcher.org}}</ref> || colspan=2| 2,850<ref name="budget_86"/> |- !|| Age under 65 || Age 65-79 || Age 80 & over |- |1987-88 || 2,425<ref name="budget_87">{{Cite web|url=https://www.margaretthatcher.org/document/111448|title=Economy: 1987 Budget (Lawson 4) | Margaret Thatcher Foundation|website=www.margaretthatcher.org}}</ref> || 2,960<ref name="budget_87"/> || 3,070<ref name="budget_87"/> |- |1988-89 || 2,605<ref name="budget_88">{{Cite web|url=https://www.margaretthatcher.org/document/111449|title=Economy: 1988 Budget (Lawson 5) | Margaret Thatcher Foundation|website=www.margaretthatcher.org}}</ref> || 3,180<ref name="budget_88"/> || 3,310<ref name="budget_88"/> |- |1989-90 |2,785 |3,400 |3,540 |- |1990–91 || 3,005 || 3,670<ref name=ARA/> || 3,820<ref name=ARA/> |- |1991–92 || 3,295 || 4,020 || 4,180 |- |1992–93 || 3,445 || 4,200 || 4,370 |- |1993–94 || 3,445 || 4,200 || 4,370 |- |1994–95 || 3,445 || 4,200 || 4,370 |- |1995–96 || 3,525 || 4,200 || 4,370 |- |1996–97 || 3,765 || 4,910 || 5,090 |- |1997–98 || 4,045 || 5,220 || 5,400 |- |1998–99 || 4,195 || 5,410 || 5,600 |- |1999–00 || 4,335 || 5,720 || 5,980 |- |2000–01 || 4,385 || 5,790 || 6,050 |- |2001–02 || 4,535 || 5,990 || 6,260 |- |2002–03 || 4,615 || 6,100 || 6,370 |- |2003–04 || 4,615 || 6,610 || 6,720 |- |2004–05 || 4,745 || 6,830 || 6,950 |- |2005–06 || 4,895 || 7,090 || 7,220 |- |2006–07 || 5,035 || 7,280 || 7,420 |- |2007–08 || 5,225<ref name="rates">{{cite web|url=http://www.hmrc.gov.uk/rates/it.htm|title=Rates and Allowances - Income Tax|publisher=HM Revenue & Customs|accessdate=2009-05-30}}</ref> || 7,550 || 7,690 |- |2008–09 || 6,035 || 9,030 || 9,180 |- |2009–10 || 6,475 || 9,490 || 9,640 |- |2010–11 || 6,475 || 9,490 || 9,640 |- |2011–12 || 7,475 || 9,940 || 10,090 |- |2012–13 || 8,105<ref name=ARA/> || 10,500<ref name=ARA/> || 10,600<ref name=ARA/> |- |2013–14 || 9,440<ref name="2013 & 2014 Personal Allowances">{{cite news|url=https://www.theguardian.com/money/2013/mar/20/personal-allowance-rise-people-tax|title=2013 & 2014 Personal Allowances|work=the guardian|access-date=2013-03-21|location=London|first=Patrick|last=Collinson|date=2013-03-20}}</ref> || 10,500 || 10,660 |- |2014–15 || 10,000<ref name="2013 & 2014 Personal Allowances"/> || 10,500 || 10,660 |- |2015–16 || 10,600<ref name="auto">{{Cite web|url=https://www.gov.uk/government/publications/rates-and-allowances-income-tax/income-tax-rates-and-allowances-current-and-past|title=Income Tax rates and allowances for current and past years|website=GOV.UK}}</ref> || style="text-align: center;" colspan=2 |- |- |2016–17 || 11,000<ref name="auto"/>|| style="text-align: center;" colspan=2 | - |- |2017–18 || 11,500<ref>{{Cite web|url=https://www.bbc.co.uk/news/live/business-31874987|title=Budget 2015: As it happened|website=BBC News|date=18 March 2015 }}</ref>|| style="text-align: center;" colspan=2 |- |- |2018–19 || 11,850<ref>{{Cite news|url=https://www.bbc.com/news/uk-politics-42056452|title=Summary of Budget 2017: Key points at-a-glance|date=22 November 2017|via=www.bbc.co.uk}}</ref>|| style="text-align: center;" colspan=2 |- |- |2019–20 || 12,500<ref>{{Cite news|url=https://www.bbc.co.uk/news/business-51769694|title=Budget 2020: What we already know about our changing finances|date=2020-03-06|work=BBC News|access-date=2020-03-20|language=en-GB}}</ref><ref>{{Cite news|url=https://www.bbc.com/news/uk-politics-46017125|title=At-a-glance summary: Budget key points|date=2018-10-29|work=BBC News|access-date=2018-10-29|language=en-GB}}</ref> || style="text-align: center;" colspan=2 |- |- |2020–21 || 12,500<ref>{{Cite news|url=https://www.bbc.co.uk/news/business-51769694|title=Budget 2020: What we already know about our changing finances|date=2020-03-06|work=BBC News|access-date=2020-03-20|language=en-GB}}</ref> || style="text-align: center;" colspan=2 |- |- |2021–22 || 12,570<ref>{{Cite web|url=https://www.gov.uk/guidance/rates-and-thresholds-for-employers-2021-to-2022|title=Rates and thresholds for employers 2021 to 2022|date=2021-02-02|access-date=2021-02-03|language=en-GB}}</ref> || style="text-align: center;" colspan=2 |- |- |2022–23 || 12,570<ref>{{Cite web|url=https://www.gov.uk/guidance/rates-and-thresholds-for-employers-2022-to-2023|title=Rates and thresholds for employers 2022 to 2023|date=7 February 2022|access-date=2025-08-27|language=en-GB}}</ref><ref name=threshold_23_26>{{Cite web|url=https://www.gov.uk/government/publications/rates-and-allowances-income-tax/income-tax-rates-and-allowances-current-and-past|title=Income Tax rates and allowances for current and previous tax years |date=6 April 2025|access-date=2025-08-27|language=en-GB}}</ref> || style="text-align: center;" colspan=2 |- |- |2023–24 || 12,570<ref>{{Cite web|last1=Seely |first1=Antony |last2=Masala |first2=Francesco |url=https://commonslibrary.parliament.uk/research-briefings/cbp-9754|title=Direct taxes: rates and allowances 2023/24|date=8 January 2024|access-date=2025-08-27|language=en-GB}}</ref><ref name=threshold_23_26/> || style="text-align: center;" colspan=2 |- |- |2024–25 || 12,570<ref name=threshold_23_26/> || style="text-align: center;" colspan=2 |- |- |2025–26 || 12,570<ref name=threshold_23_26/> || style="text-align: center;" colspan=2 |- |}
==See also== *Income tax in Scotland *Welsh Rates of Income Tax
==References== {{Reflist}}
==External links== * UK Government website: [https://www.gov.uk/income-tax-rates Income Tax rates and Personal Allowances] * Detailed list of rates paid between 1972 - 2005: [http://www.taxhistory.co.uk/Income%20Tax%20Allowances.htm Tax History- UK Historic Personal Tax Regime] * About the Personal Savings Allowance: [https://www.crowdstacker.com/knowledge/why-you-need-know-about-new-personal-savings-allowance Why you need to know about new Personal Savings Allowance]
Category:Income taxes Category:Personal taxes Category:Taxation in the United Kingdom