What Is the Personal Allowance? UK 2025-26 Explained
The Personal Allowance is the amount of income you can earn each tax year before paying any income tax. For 2025-26, it is £12,570 — unchanged since 2021-22 and frozen until at least 2027-28 as part of fiscal drag policy.
How the Personal Allowance works
Your Personal Allowance is deducted from your total income before tax is calculated. If you earn £20,000 per year, only £7,430 (£20,000 minus £12,570) is taxable at 20% — giving you an income tax bill of £1,486.
Everyone resident in the UK is automatically entitled to the standard Personal Allowance. It is reflected in your PAYE tax code — the most common code is 1257L (1257 representing £12,570, with a zero added; L meaning standard allowance).
Personal Allowance reduction above £100,000
The Personal Allowance reduces by £1 for every £2 of adjusted net income above £100,000. This means:
- At £100,000: full £12,570 allowance
- At £112,570: allowance reduced by £6,285 to £6,285
- At £125,140 or above: allowance reduced to £0
This taper creates an effective 60% marginal tax rate on income between £100,000 and £125,140 — because every £2 earned in this band loses £1 of allowance, adding 20% effective tax on top of the 40% Higher Rate.
Marriage Allowance: transferring part of your Personal Allowance
If you earn below £12,570 (meaning you do not use all of your Personal Allowance), you can transfer 10% of it — £1,260 — to a spouse or civil partner who pays Basic Rate tax. This reduces their tax bill by up to £252 per year. You cannot claim Marriage Allowance if your spouse is a Higher Rate taxpayer.
Personal Allowance and Scottish income tax
The Personal Allowance is set by Westminster and applies in Scotland as it does in England and Wales. Scottish taxpayers receive £12,570 before their income is taxed — but the rates that apply above that threshold differ from the rest of the UK.
The freeze effect: fiscal drag
Freezing the Personal Allowance while wages rise is a form of stealth tax known as fiscal drag. In 2021-22, the average UK full-time salary was around £31,000. By 2025-26 it is closer to £37,000. More of the average worker's salary is now taxable than it was four years ago — even though the rate has not changed.
Frequently asked questions
Will the Personal Allowance increase in 2026-27?
The government has announced that the Personal Allowance will remain frozen at £12,570 until at least 2027-28. Any changes beyond that will depend on future Budgets.
Does the Personal Allowance apply to pension income?
Yes. Pension income counts as income for tax purposes, and the Personal Allowance applies. State Pension is also income — if your State Pension plus any other income exceeds £12,570, you pay income tax on the excess.
Can I claim a higher Personal Allowance if I am registered blind?
Yes. If you are registered blind (severely sight impaired), you are entitled to the Blind Person's Allowance of £3,070 on top of the standard Personal Allowance — giving a total tax-free amount of £15,640 in 2025-26.