personal allowance

In the UK tax system, personal allowance, typically £12,570 in tax year 2025-26, is the threshold above which income tax is levied on an individual's taxable income. Taxable income is money earned from employment, profits from self-employment, some state benefits, most pensions including state pensions, rental income, benefits from a job, income from a trust, and interest on savings. A person who has taxable income below their personal allowance in a given tax year does not pay income tax; otherwise, tax must be paid on income above personal allowance.
There is an additional blind person's allowance of £3,130. The marriage allowance allows a person earning less than £12,570 to transfer £1,260 of personal allowance to a husband, wife or civil partner. Historical additional allowances for married couples and age related allowances for over-65s and over-75s and an allowance on mortgage interest have been phased out.
From April 2010 personal allowance is tapered for people earning over £100,000 a year: for every £2 earned above £100,000 the personal allowance is reduced by £1 until incomes above £125,140 have zero personal allowance. The additional £2 of income and the £1 removed from the tax free allowance are taxed at 40%, resulting in £1.20 ((2 + 1) * 40%) tax being paid for every additional £2 of income, a marginal tax rate of 60% (1.20 / 2 * 100) on incomes between £100,000 and £125,140.
There are additional tax allowances on income from savings interest and on rental income for resident landlords. Earnings from capital gains, and dividends have different tax thresholds and are taxed at different rates to income tax. Individuals also pay National Insurance Contributions an additional tax on income (paid at different rates by employees and employers).

View More On Wikipedia.org