The Personal Allowance is the amount of income a person can receive each tax year before paying Income Tax. It is £12,570, and it is reduced for people with income over £100,000.
How it works
The first £12,570 of your income in a tax year is covered by the Personal Allowance and is free of Income Tax. It is set against all your income together: wages, pensions, self-employed profits, rent, savings interest and dividends.
The rates above it
For England, Wales and Northern Ireland, on earnings, profits and pensions:
| Taxable income | Rate |
|---|---|
| £12,571 to £50,270 | Basic rate, 20% |
| £50,271 to £125,140 | Higher rate, 40% |
| Over £125,140 | Additional rate, 45% |
Scotland has its own rates and bands for earnings, with the same Personal Allowance.
When it is reduced
The allowance falls by £1 for every £2 of income over £100,000, so it disappears completely at £125,140. Income in that range is effectively taxed at 60%.
Read more: Your Self Assessment calculation and Reliefs and allowances.