15/04/2025Personal Tax
What are the current personal tax allowances? Understanding income tax matters is crucial if you are living in the UK, as you are liable to pay income tax according to your income level. Knowing current personal tax allowances will help you calculate the accurate tax amount while filing a tax return. This article is the right place to gather all relevant information on current personal tax allowances.
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What are the Current Personal Tax Allowance?
What are the current personal tax allowances? Income tax is imposed on multiple types of income in the UK. Generally, the income tax is imposed on daily wages, salary, and monthly salary as well. Other income types on which the tax is applicable are:
- profits if you run a business and the profits are above the income tax relief
- interest and dividends from savings and investments
- Rent you get if you’re a landlord
Income tax is generally not applicable to all your gross income. This is because there are certain allowances and relief limits set for each tax band by the HMRC.
An allowance is the amount of money you can earn without paying tax on it at the end of the financial year.
What is a Personal Allowance?
All residents in the UK above 18 years of age are liable to pay income tax. However, the amount of money each individual can earn without paying tax on it is called a personal allowance. Personal allowance is applicable to students as well.
For the financial year 2025/2026, the current personal tax allowance limit is £12,570. If you earn less than £12,570, then you are not liable to pay any income tax.
The personal allowance differs for every individual. If you are married, your personal allowance limit might be bigger than usual if you claim a marriage allowance. The blind person allowance is also given by the UK government to special persons. However, it might be otherwise; your allowance can get smaller if you are a high earner and you haven’t paid tax for the previous year as well.
How Much Shall I Pay?
Below are the allowances and their threshold values
- Personal Allowance
The personal allowance limit for the year 2025/2026 is £12,570, and the tax rate is 0%.
- Income threshold for personal allowance
The income threshold for personal allowance is £100,000.
The Marriage allowance for the year 2025/2026 is £1260.
- Personal savings allowance
The personal savings allowance for the year 2025/2026 is £1000/£500.
- Dividend tax allowance
The dividend allowance is the tax-free amount earned in a financial year. It is other than the personal tax allowance, so as long as your dividend share falls under your dividend allowance amount, you are not liable to tax. The tax-free dividend allowance for the financial year 2025-2026 is £500. The personal tax-free allowance can be used for most types of income, including dividends.
If you earn above the threshold value in each category, you will be charged £1 for every £2 you earn until you are above the threshold level becomes zero.
In the case of a marriage allowance, a 20% tax deduction is given as a marriage allowance in your tax bill, this is in contrast to other income tax deductions, which are directly deducted from your salary.
The Personal Allowance If You Earn Over £100,000
According to the rules set by HMRC, if you earn more than £100,000, the personal allowance threshold will be reduced by £1 for every £2 you earn above the £100,000 limit. If you earn £125,140, you are liable to pay tax on everything with no tax-free allowance given.
If You’re Employed or Get a Pension
If you are employed or getting a pension, you should estimate your income tax to see if
- Your personal allowance and tax code
- How much tax you have already paid in the current tax year
- How much do you have to pay in the current tax year
Tax Bands in the UK
There are four different tax bands and different dividend tax brackets.
- Personal allowance
This tax band ranges from an income of £0-£12,570. The income tax bracket on this band is 0%, and the dividend tax bracket is also 0%.
- Basic rate
This tax band ranges from an income of £12,571-£50,270. The income tax bracket on this band is 20%, and the dividend tax bracket is 8.75%.
- Higher rate
This tax band ranges from an income of £50,271-125,140. The income tax bracket on this band is 40%, and the dividend tax bracket is 33.75%.
- Additional rate
This tax band ranges from an income of over £125,140. The income tax bracket on this band is 45%, and the dividend tax bracket is 39.35%.
How Much Do You Pay Depends on Your Earnings?
The tax-free personal allowance depends on the annual income of an individual, including income from employment, state pension, old-age benefits, savings and investments, relief funds, and exemptions.
If you earn up to £17,570
To calculate your allowance:
- Take your allowance, which is usually either:
- £12,570
- £13,830 if claiming Marriage Allowance
- £15,440 if claiming the Blind Person’s Allowance opens in a new window
- Add £6,000—this is the maximum starting rate band for savings and the Personal Savings Allowance (PSA).
Minus any non-savings income, such as your wages or pension
What is Income tax used for?
The income tax is collected by the HMRC and used to provide funding for public services. These services include National Health Services, the education and welfare system, old age benefits and investments in public projects such as roads, rail and housing, etc.
Conclusion
The current personal tax allowance is the amount that can be earned in a year without paying tax. The current personal tax allowance is £12,570. Any amount above this will be charged income tax. For every £2 you earn, you are charged £1 if you earn above £100,000. If you earn above £125,140, you are liable to pay tax on each income without any tax-free allowance. There are different allowance limits for different tax bands. The income tax is used for funding public projects such as health, education, social welfare, and the construction of railways, roads, and housing projects.
Reach out to our intelligent and clever-minded guys to get the answer to your queries in the UK, we will get back to your quickly. We will help to decide how to deal with your tax implications.
Disclaimer: The information about the current personal tax allowance provided in this blog includes text and graphics of a general nature. It does not intend to disregard any of the professional advice.