How Much Can You Earn Before Paying Tax in 2025-26?

The most commonly cited answer to "how much can I earn tax-free?" is £12,570 — the personal allowance for 2025-26. But that figure only captures one part of the picture. Depending on where your income comes from — employment, savings, dividends, or a combination — the total amount you can receive before paying any income tax may be considerably higher. This guide explains every allowance available and how they stack together.

The personal allowance: £12,570

The personal allowance is the amount of income every UK resident (below a certain income level) can receive completely free of income tax. It applies to employment income, self-employment profits, rental income, pension income, and most other income types. For 2025-26 it remains at £12,570 — frozen since April 2021. You lose £1 of personal allowance for every £2 of adjusted net income above £100,000, meaning the allowance is fully withdrawn at £125,140.

Note that National Insurance is separate from income tax. Employee NICs apply on earnings above £12,570 per year (the primary threshold matches the personal allowance from 2022-23), so if your only income is employment income, you will pay NICs at 8% once you earn above £12,570, even though no income tax is owed on income below that level.

The starting rate for savings: up to £5,000

If your non-savings income (employment, self-employment, pensions) is below £17,570, you may benefit from the starting rate for savings — a 0% tax rate on savings interest up to £5,000. The starting rate band is reduced pound for pound by any non-savings income above £12,570. So:

• Non-savings income of £12,570 or less: full £5,000 starting rate available
• Non-savings income of £15,000: £2,570 of starting rate remaining
• Non-savings income of £17,570 or more: no starting rate available

For a retiree or part-time worker with low employment income but significant savings, this can shelter a meaningful amount of interest income from tax entirely.

The personal savings allowance: £1,000 or £500

In addition to the starting rate, basic-rate taxpayers can receive £1,000 of savings interest per year free of tax through the Personal Savings Allowance (PSA). Higher-rate taxpayers have a £500 PSA. Additional-rate taxpayers have no PSA. This allowance sits on top of the starting rate band — meaning a low-income earner could theoretically shelter £6,000 of savings interest tax-free (£5,000 starting rate + £1,000 PSA).

The dividend allowance: £500

The dividend allowance allows investors and company directors to receive £500 of dividends without paying dividend tax. This applies on top of the personal allowance. A basic-rate taxpayer with no other income could therefore receive £12,570 in salary (or pension or self-employment profits) plus £500 in dividends before paying any income tax at all — £13,070 in total.

Marriage allowance: transfer up to £1,260

Married couples and civil partners where one earner has income below the personal allowance can transfer up to £1,260 of their unused allowance to the higher earner — saving the recipient up to £252 per year in income tax. To claim, the recipient must be a basic-rate taxpayer (not higher-rate). This can be backdated up to four years. Use the marriage allowance calculator.

How the allowances stack for a low earner with savings and dividends

Consider someone with £10,000 in employment income, £3,000 in savings interest, and £500 in dividends in 2025-26:

• Employment income: £10,000 — within personal allowance, no income tax
• Savings interest: £3,000 — within starting rate band (£2,570 remaining after £10,000 employment income) and PSA, no tax
• Dividends: £500 — within dividend allowance, no tax
• Total income received: £13,500. Income tax: £0.

Conclusion

The total income you can receive before paying income tax in 2025-26 depends significantly on your income mix. For many people with modest savings and investment income, the effective tax-free threshold is well above £12,570. Understanding the available allowances is the first step to ensuring you are not paying tax unnecessarily. Use our calculator to see your take-home pay at any income level, and explore our savings and dividend calculators to understand how different income types interact.