UK Tax Allowances 2025-26, The Complete Guide
Every UK tax-free allowance in one place for the 2025-26 tax year (6 April 2025-5 April 2026). Income tax, savings, dividends, capital gains, ISA, pension, inheritance, and more, with thresholds, rules, tapers and links to every relevant calculator.
What is a tax allowance?
A tax allowance is an amount of income, gains or contributions that is either exempt from tax entirely, or taxed at a reduced rate. Using every allowance you are entitled to is the single easiest way to reduce your UK tax bill legally. Most are automatic, but some (Marriage Allowance, Gift Aid, Rent a Room) have to be claimed, and several require an election on your Self Assessment return. If you do not use a given year's allowance, it is usually lost forever.
On this page
1. Income tax allowances
These allowances apply to your earned income (salary, self-employment profit, rental income, pension income). They are applied before any income tax is calculated.
| Allowance | Amount 2025-26 | Who qualifies |
|---|---|---|
| Personal Allowance | £12,570 | Everyone (tapered above £100,000) |
| Marriage Allowance | £1,260 transfer | Married / civil partners, lower earner < £12,570 |
| Married Couple's Allowance | Up to £11,270 | One partner born before 6 April 1935 |
| Blind Person's Allowance | £3,130 | Registered blind / severely sight-impaired |
| Maintenance Payments Relief | Up to £471 | Divorced, one spouse born before 6 April 1935 |
Learn more: Marriage Allowance calculator · Personal Allowance detail · Salary tax calculator
2. Investment, savings & dividend allowances
These allowances shield investment income and gains from tax. They apply in addition to the Personal Allowance, meaning a basic-rate taxpayer can earn up to £1,500 of savings and dividend income entirely tax-free on top of their salary.
| Allowance | Amount 2025-26 | Notes |
|---|---|---|
| Personal Savings Allowance (basic rate) | £1,000 | Interest from banks/building societies |
| Personal Savings Allowance (higher rate) | £500 | Income £50,271-£125,140 |
| Personal Savings Allowance (additional rate) | £0 | Income above £125,140 |
| Starting Rate for Savings | Up to £5,000 | Low earners only (reduced £1 per £1 earnings > £12,570) |
| Dividend Allowance | £500 | Cut from £1,000 in April 2024 |
| CGT Annual Exempt Amount | £3,000 | Cut from £6,000 in April 2024 |
| ISA Allowance (total) | £20,000 | Cash, Stocks & Shares, Innovative Finance, LISA |
| ↳ Lifetime ISA sub-limit | £4,000 | 25% government bonus (£1,000/year max) |
| ↳ Junior ISA limit (per child) | £9,000 | Separate from adult £20,000 |
Learn more: Savings interest calculator · Dividend allowance · Capital Gains Tax · ISA vs pension
3. Property & side-hustle allowances
If you let out a spare room, sell on Etsy or Vinted, drive for Uber at weekends, or rent out a parking space, these allowances can wipe out the tax on small amounts of that income without any paperwork.
| Allowance | Amount 2025-26 | Applies to |
|---|---|---|
| Trading Allowance | £1,000 | Self-employment, casual / side-hustle income |
| Property Allowance | £1,000 | Rental income (not covered by Rent a Room) |
| Rent a Room Scheme | £7,500 | Furnished room in your main residence |
| Mileage Allowance (AMAP) | 45p / 25p per mile | First 10,000 business miles / above |
Learn more: Rent a Room calculator · Side hustle tax · Mileage allowance · Self-employed tax
4. Pension & retirement allowances
Pensions receive the most generous tax treatment of any UK savings vehicle: contributions get income tax relief at your marginal rate, growth is tax-free, and 25% can be taken as a tax-free lump sum in retirement. The Lifetime Allowance was abolished from 6 April 2024 and replaced with two lump sum limits.
| Allowance | Amount 2025-26 | Notes |
|---|---|---|
| Annual Allowance | £60,000 | Tax-relieved pension contributions per year |
| Tapered Annual Allowance (min) | £10,000 | Adjusted income > £360,000 |
| Money Purchase Annual Allowance (MPAA) | £10,000 | Triggered by flexibly accessing DC pension |
| Carry Forward (max) | Up to £180,000 | 3 years × £60,000 unused |
| Lump Sum Allowance (LSA) | £268,275 | Tax-free cash you can take in retirement |
| Lump Sum and Death Benefit Allowance (LSDBA) | £1,073,100 | Total tax-free lump sums incl. death benefits |
| Minimum contribution for tax relief | £3,600 gross | Even with no earnings |
Learn more: Pension tax relief calculator · Salary sacrifice · State Pension · ISA vs pension
5. Inheritance Tax & gifting allowances
Inheritance Tax (IHT) is charged at 40% on estates above the Nil Rate Band. A careful combination of the residence allowance, the spousal exemption, and lifetime gifting can legitimately shelter well over £1 million from IHT for a couple.
| Allowance | Amount 2025-26 | Notes |
|---|---|---|
| Nil Rate Band (NRB) | £325,000 | Frozen until April 2030 |
| Residence Nil Rate Band (RNRB) | £175,000 | Home left to direct descendants |
| Transferable NRB (married couples) | Up to £1,000,000 | £325k + £175k × 2 |
| Annual Gift Exemption | £3,000 | Can carry forward 1 year unused |
| Small Gift Exemption | £250 per person | Unlimited recipients |
| Wedding Gifts (from parent) | £5,000 | £2,500 from grandparent, £1,000 from others |
| Regular Gifts from Surplus Income | Unlimited | Must be habitual & from excess income |
Learn more: Inheritance Tax calculator · Stamp Duty
6. Other tax reliefs & allowances
A handful of extra reliefs that do not slot neatly into the categories above but are widely claimed.
| Relief | Amount 2025-26 | Notes |
|---|---|---|
| Gift Aid | No cap | Charity gets +25%, higher-rate reclaim extra 20/25% |
| Tax-Free Childcare | £2,000 / child / year | £4,000 if disabled, government adds 20% |
| Workplace Pension Contribution | Auto-enrolment | Min 5% employee + 3% employer |
| Cycle to Work Scheme | Up to £1,000+ | Salary sacrifice, saves income tax + NI |
| Professional Subscriptions | Actual cost | HMRC-approved bodies only |
| Uniform / Tools Flat Rate Expense | £60-£185 | Depends on occupation |
| Working From Home Allowance | £6/week | Only if required to WFH by employer |
Learn more: Gift Aid calculator · Tax-Free Childcare · Salary sacrifice schemes
7. How to stack allowances, a worked example
Consider a basic-rate taxpayer earning £40,000 who also has some savings, dividends and a spare room. Here is how far their allowances can go in a single tax year:
| Allowance used | Amount | Tax saved |
|---|---|---|
| Personal Allowance on salary | £12,570 | £2,514 |
| Personal Savings Allowance (interest) | £1,000 | £200 |
| Dividend Allowance | £500 | £44 |
| CGT Annual Exempt Amount | £3,000 | £540 |
| ISA subscription (tax-free growth) | £20,000 | Future tax-free |
| Rent a Room scheme | £7,500 | £1,500 |
| Trading Allowance (side hustle) | £1,000 | £200 |
| Marriage Allowance (if eligible) | £1,260 | £252 |
| Total sheltered / saved | £46,830 | £5,250 |
Not everyone will use every allowance, the point is that they are independent and do not crowd each other out. If you are eligible for all of them, HMRC will not limit you to one.
How UK tax allowances actually work
The UK tax system is built around a stack of allowances that reduce the income, gains or contributions subject to tax. At the bottom sits the Personal Allowance of £12,570, the starting point for almost everyone. Above it, most other allowances apply to specific types of income: savings interest, dividends, rental income, self-employment profit, or gifts. Because the allowances target different sources, they can generally be used together without interfering with each other.
The big exception is the Personal Allowance taper. Once your adjusted net income passes £100,000, you lose £1 of Personal Allowance for every £2 you earn, and it is gone entirely at £125,140. Combined with 40% tax on the same income, this creates a marginal rate of 60% on earnings between £100,000 and £125,140, one of the most quoted numbers in UK personal tax planning. The most common response is increasing pension contributions, which reduce adjusted net income pound-for-pound and can fully reclaim the allowance.
Allowances that were cut recently
Several investment allowances have been slashed in the last two years, and the direction of travel is clear:
- Dividend Allowance: £2,000 → £1,000 (April 2023) → £500 (April 2024). Now at £500.
- Capital Gains annual exempt amount: £12,300 → £6,000 (April 2023) → £3,000 (April 2024). Now at £3,000.
- Additional Rate threshold: £150,000 → £125,140 (April 2023). More people now pay 45%.
- Lifetime Allowance: abolished from April 2024. Replaced by £268,275 Lump Sum Allowance.
At the same time, the ISA allowance has been frozen at £20,000 since 2017-18 but remains the most valuable shelter for long-term investors, gains, interest and dividends inside an ISA are never subject to UK tax. The Pension Annual Allowance was increased from £40,000 to £60,000 in April 2023 and is unchanged.
Allowances in Scotland, Wales and Northern Ireland
Almost every allowance on this page is set by the UK Parliament and applies identically across all four nations. What differs in Scotland is the income tax bands and rates that apply above the Personal Allowance, Scotland has six bands from 19% to 48% rather than the three-band 20%/40%/45% used elsewhere. Wales has the legal power to vary income tax rates but has so far mirrored the rates used in England. Northern Ireland uses the same income tax system as England. National Insurance, Capital Gains Tax, Inheritance Tax, ISA and pension allowances are UK-wide.
When and how to claim
Most allowances are applied automatically, the Personal Allowance is built into your tax code, the Personal Savings Allowance is granted through PAYE adjustments or reconciliation, and the CGT and Dividend Allowances are deducted when you complete Self Assessment. A few need an active claim: Marriage Allowance (apply once online; it then renews automatically), Gift Aid higher-rate relief (claimed via Self Assessment or a PAYE code change), Rent a Room above £7,500 (tick the box on Self Assessment), and Blind Person's Allowance (apply to HMRC with proof of registration). If you think you have missed a claim, you can normally backdate up to four previous tax years.
Frequently asked questions
What is the Personal Allowance for 2025-26?
The standard Personal Allowance is £12,570, the first £12,570 of income each tax year is free of income tax. It is the same across England, Scotland, Wales and Northern Ireland. The allowance is reduced by £1 for every £2 of adjusted net income above £100,000, and is fully withdrawn at £125,140, creating the well-known 60% effective marginal rate between those two figures. See our Personal Allowance page.
Can I use multiple tax allowances at the same time?
Yes. UK allowances are largely independent, they target different sources of income, so they stack. A basic-rate taxpayer can legitimately use the £12,570 Personal Allowance, £1,000 Personal Savings Allowance, £500 Dividend Allowance, £3,000 CGT exemption, £20,000 ISA subscription, £7,500 Rent a Room relief and £1,000 Trading Allowance in the same tax year. Together these can shelter over £45,000 of income and gains from tax.
Do allowances reset every tax year?
Most do, on 6 April each year: ISA, Dividend Allowance, Personal Savings Allowance, CGT annual exempt amount, Gift Aid declarations, and Marriage Allowance all reset. Unused amounts are lost, you cannot carry them forward. The major exception is the Pension Annual Allowance, which lets you carry forward up to three years of unused allowance if you were a member of a registered pension scheme in each of those years (potentially allowing a £180,000+ contribution in one go).
What happens if I exceed an allowance?
The excess is taxed at the applicable rate. Dividends above £500 are taxed at 8.75% / 33.75% / 39.35% depending on your band. Savings interest above your PSA is taxed at 20% / 40% / 45%. Capital gains above £3,000 are taxed at 18% (basic rate) or 24% (higher/additional rate). Pension contributions above the Annual Allowance trigger a charge at your marginal income tax rate. Going over the ISA limit means any extra interest, dividends or gains on the excess are taxable, HMRC will contact you to remove the excess.
Are tax allowances the same in Scotland, Wales and Northern Ireland?
Yes, the allowances themselves are set by the UK government and apply identically across all four nations. Personal Allowance, ISA, CGT, Dividend, Savings, Pension, Inheritance Tax and gifting allowances are all UK-wide. What differs in Scotland is the income tax rates and bands (six bands from 19% to 48%). Wales has devolved income tax powers but currently mirrors English rates. Northern Ireland uses the same rates as England. See our England vs Scotland comparison.