What is the UK Personal Allowance and How Does It Work?

The UK personal allowance is the amount of income you can earn each tax year before paying income tax — currently £12,570 for 2026/27. It applies to most types of income (salary, self-employment, pension, rental). The allowance is reduced by £1 for every £2 of adjusted net income above £100,000, completely disappearing at £125,140. Some special cases (Marriage Allowance, Blind Person’s Allowance) can increase your effective allowance. HMRC applies your personal allowance via your tax code — typically 1257L for most employees.

This is the framework for 2026/27.

The basic figures

For the 2026/27 tax year (6 April 2026 to 5 April 2027):

• Standard personal allowance: £12,570.
• Frozen at this figure since 2021/22. The freeze was originally to 2026, then extended to 2028, and the 2025 Autumn Budget extended it again to April 2031.

Above the personal allowance, income tax bands kick in:

• Basic rate (20%): £12,571 to £50,270.
• Higher rate (40%): £50,271 to £125,140.
• Additional rate (45%): above £125,140.

(Scotland has different income tax bands but the same personal allowance.)

What “adjusted net income” means

The £100,000 taper is based on adjusted net income, not gross salary:

• Start with your total taxable income (salary, self-employed profit, dividends, rental, etc.).
• Subtract grossed-up pension contributions you made personally.
• Subtract Gift Aid donations.
• The result is adjusted net income.

For someone earning £105,000 gross but contributing £5,000 to a personal pension:

• Adjusted net income: £105,000 − £5,000 = £100,000.
• Personal allowance: full £12,570 (not tapered).

This is one of the most valuable tax-planning moves for high earners — pension contributions can preserve the personal allowance.

The £100,000 taper

Above £100,000 of adjusted net income, the personal allowance reduces:

• £1 reduction in PA for every £2 over £100,000.
• PA fully exhausted at £125,140 (£100,000 + £12,570 × 2).

The taper creates an effective marginal tax rate in the £100k–£125,140 band of approximately 60% — see our £100k tax trap article for the full mechanics.

Many high-earners use pension contributions to drop adjusted income back below £100,000 and restore the full personal allowance.

How tax codes work with personal allowance

HMRC applies your personal allowance via your tax code:

• Standard code 1257L: full personal allowance (£12,570 / 10).
• The code tells your employer to apply £12,570 of tax-free income against your salary before deducting tax.

The L is the suffix for “standard” allowance. Other suffixes indicate adjustments:

• M: receiving Marriage Allowance.
• N: giving Marriage Allowance.
• T: special calculations applied (often when taper is in effect or benefits-in-kind included).
• K: negative allowance (you have effectively no personal allowance, often due to large benefits-in-kind).
• BR: no personal allowance (used for second jobs).
• D0: every pound taxed at 40% (used for very high-income second jobs).
• NT: no tax (specific cases like non-residents).

See our tax codes article for the full list.

What the personal allowance applies to

The personal allowance covers most types of taxable income:

• Salary (PAYE income).
• Self-employment profit.
• Pension income (state pension, private pension drawdown).
• Rental income.
• Interest (above the Personal Savings Allowance).
• Dividends (above the Dividend Allowance).
• Property gains subject to income tax (rare).

Not covered:

• ISA interest, dividends, gains — separately tax-free under ISA rules.
• CGT — uses its own annual exempt amount (£3,000).
• Inheritance Tax — different framework.

Special allowances and additions

Beyond the standard £12,570:

Marriage Allowance

A non-tax-paying spouse can transfer £1,260 of allowance to their basic-rate-paying partner:

• Increases recipient’s allowance to £13,830.
• Saves recipient up to £252 of tax per year.
• Backdating up to 4 years allowed.

See our Marriage Allowance guide (coming soon).

Blind Person’s Allowance

Registered blind / severely sight-impaired individuals receive additional allowance:

• 2026/27: £3,070 added to personal allowance.
• Increases total allowance to £15,640.
• Claimed via Self Assessment or by contacting HMRC.

HMRC Blind Person’s Allowance.

Age-related allowances (legacy)

Once existed for over-65s and over-75s. Phased out from 2013 onward — all working-age and pension-age people now use the same £12,570 standard.

How NI interacts with personal allowance

Income tax and National Insurance use different thresholds:

• Personal allowance: £12,570 (for income tax).
• NI primary threshold (employee Class 1): £12,570 (matched in recent years).
• NI lower earnings limit: £6,396.

So:

• Income £6,396–£12,570: NI not paid (below primary), income tax not paid (below personal allowance).
• Income £12,570+: both kick in.

Class 4 NI (self-employed): £12,570 lower limit, same as income tax personal allowance.

What if I have multiple sources of income?

The personal allowance is a single £12,570 across all your income, not per source.

For someone with PAYE salary + rental + self-employed income:

• Combined income totalled.
• £12,570 personal allowance applied to the combined total.
• Tax bands applied to the remainder.

HMRC applies the allowance via the tax code on your main income source. Other income sources are typically taxed without allowance (using BR or D0 codes if PAYE, or via Self Assessment for self-employment / rental).

You can ask HMRC to split the allowance across multiple PAYE jobs if your main job pays less than £12,570 — see our second job tax article.

The freeze and its effects

The personal allowance has been frozen at £12,570 since 2021/22:

• Was previously raised in line with inflation.
• Freeze creates fiscal drag — as wages rise with inflation, more people enter higher tax bands without rates technically changing.
• Currently frozen until April 2031 (extended again at the 2025 Autumn Budget).

This is one of the largest stealth tax rises in recent UK history. Over the freeze period, millions of additional taxpayers have entered the higher-rate band, and the personal allowance’s real value has declined.

Personal allowance for Scottish taxpayers

Scotland has different income tax bands but the same £12,570 personal allowance:

• Above £12,570, the Scottish six-band system applies (19%, 20%, 21%, 42%, 45%, 48%).
• The personal allowance taper above £100,000 is identical to the rest of the UK.

The split applies based on your tax residence (where you live), not where you work.

Personal allowance for non-residents

If you become non-UK resident:

• You generally lose access to the personal allowance for UK income tax purposes.
• Exceptions exist for UK citizens, EEA nationals and some other cases (subject to specific rules and double-tax treaties).

For non-residents earning UK rental income or working in the UK part-year, the rules are nuanced. See our overseas tax article for the framework.

Worked example: typical salary calculation

Imran earns £45,000 PAYE salary. No other income.

Tax calculation:

• Personal allowance: £12,570.
• Taxable income: £45,000 − £12,570 = £32,430.
• Basic rate (20%): £32,430 × 20% = £6,486.
• Higher rate: N/A (income below £50,270).
• Total income tax: £6,486.

NI calculation (separately, Class 1 employee):

• NI primary threshold: £12,570 (no NI below).
• 8% on £12,570–£50,270 (or up to gross): (£45,000 − £12,570) × 8% = £2,594.
• Total NI: £2,594.

Take-home: £45,000 − £6,486 − £2,594 = £35,920. Net £2,993/month.

Internal links

• How much can I earn before paying tax on a second job?
• UK tax codes explained
• The £100k tax trap explained

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This guide is information, not regulated financial advice. Tax rules can change between budgets — confirm on gov.uk before acting.