The personal tax allowance is one of the most important figures in the UK tax system. It is the amount of income you can earn each year before you start paying Income Tax. For the 2025/26 tax year, which runs from 6 April 2025 to 5 April 2026, the standard Personal Allowance remains at £12,570. This figure has not changed from the previous year.
Although the Personal Allowance remains at £12,570, it is frozen until 5 April 2031. As wages and investment income gradually increase, more people will end up paying higher rates of tax even if their spending power has not improved. This is known as fiscal drag, and it could mean a bigger tax bill for landlords, investors and savers.
What Is the Personal Tax Allowance for 2025/26?
The standard Personal Allowance for 2025/26 is set at £12,570. No tax is charged on income up to this amount. This applies to most UK residents in England, Wales, and Northern Ireland. Scottish taxpayers have the same Personal Allowance but pay income tax at different rates set by the Scottish Government.
Your tax code for 2025/26 reflects this allowance. The standard tax code for most employees in 2025/26 is 1257L, reflecting the standard Personal Allowance. However, emergency tax codes can vary depending on individual circumstances and are not universally set to 1257L. If your tax code does not show 1257L and you have no unusual circumstances, you should contact HMRC to check whether you are receiving your full allowance.
Income Tax Rates and Bands for 2025/26
Once your income exceeds £12,570, tax is charged at the following rates in England, Wales, and Northern Ireland:
Income tax on earned income is charged at three rates for 2025/26: the basic rate at 20%, the higher rate at 40%, and the additional rate at 45%.
The Income Bands are as follows:
Personal Allowance: up to £12,570 at 0% Basic rate: £12,571 to £50,270 at 20% Higher rate: £50,271 to £125,140 at 40% Additional rate: over £125,140 at 45%
Note
These bands are unchanged from 2024/25. However, they have not all remained the same since 2022/23, as the additional rate threshold was reduced from £150,000 to £125,140 from 6 April 2023.
The Personal Allowance Taper: High Earners Lose Out
Not everyone receives the full £12,570 allowance. Your personal allowance goes down by £1 for every £2 that your adjusted net income is above £100,000. This means your allowance is zero if your income is £125,140 or above.
This taper creates what many tax professionals describe as a 60% effective marginal tax rate on income between £100,000 and £125,140. For every £2 earned in this range, you lose £1 of your tax-free allowance, resulting in £1 of additional income being taxed at 40%. This makes careful income planning essential for anyone approaching the £100,000 threshold.
Practical Example: The £100,000 Trap
Suppose you earn £105,000 from employment. Your income exceeds £100,000 by £5,000. Your Personal Allowance is reduced by £2,500, leaving you with an allowance of only £10,070. This means you pay 40% tax on income you would otherwise have received tax free. Making a pension contribution to bring your adjusted net income back below £100,000 can restore your full allowance and represent a very efficient use of your money.
The Freeze Until 2031: What It Really Means for You
The ongoing freeze of the Personal Allowance is not a neutral policy. The government expects this measure to bring 700,000 individuals into Income Tax by 2030 to 2031, compared to if these thresholds were indexed with the Consumer Prices Index from 2028 to 2029 onwards.
In practical terms, if your salary increases each year to keep pace with inflation or cost of living rises, you will pay a larger proportion of your income in tax. You are not earning more in real terms, but your tax bill grows regardless.
This is particularly relevant for people with:
Salary increases from employers’ Rental income that rises with the housing market Savings interest that has grown following recent Bank of England base rate rises Investment income or dividends that fluctuate year on year
Personal Tax Allowance & Property Income
If you receive rental income in the UK, your Personal Allowance applies to your total income, including that rental income. However, there are specific allowances worth knowing about.
The Property Allowance
Property income of less than £1,000 does not need to be reported to HMRC and is tax free. This is known as the property allowance. If your gross annual rental income is above £1,000, you can choose either to use this tax-free allowance or to deduct your actual relevant expenses instead. You cannot do both.
Rent a Room Scheme
The Rent a Room Scheme lets individuals earn up to a threshold of £7,500 per year tax free from letting out furnished accommodation in their home, or £3,750 for joint lettings. This is a separate and very generous relief if you let a furnished room in your own home.
Practical Example: Landlord with Multiple Income Sources
Consider Sarah, who earns £38,000 from employment and receives £9,000 in gross rental income each year. Her total income is £47,000. After deducting her Personal Allowance of £12,570 and relevant property expenses, she pays basic rate tax at 20% on the remaining taxable income. Because she falls below the £50,270 higher rate threshold, she stays within the basic rate band for 2025/26.
However, if Sarah received a pay rise taking her total income to £51,000, she would start paying 40% tax on income above the £50,270 threshold. At this point, maximising deductible property expenses, considering pension contributions, or reviewing investment structures all become more important.
Savers benefit from a separate Personal Savings Allowance, which sits on top of the standard Personal Allowance.
Most UK taxpayers are entitled to a Personal Savings Allowance, on top of their standard Personal Allowance of £12,570, which allows individuals to earn a certain amount of savings income each tax year outside of an ISA without paying tax. Basic rate taxpayers can receive £1,000 of interest without paying tax, and higher rate taxpayers can receive £500 without paying tax. Additional rate taxpayers receive no Personal Savings Allowance.
With interest rates having risen significantly in recent years, many savers who previously had no savings tax liability are now receiving interest above these thresholds for the first time.
Lower earners may also benefit from the Starting Rate for Savings, which allows individuals to receive up to £5,000 of savings income tax-free, in addition to their Personal Allowance. To qualify, your non-savings and non-dividend income must be less than £17,570. The Starting Rate for Savings applies a 0% tax rate on this interest income.
Marriage Allowance: A Tax Saving Many Couples Miss
Individuals whose income is insufficient to make full use of their personal allowance can transfer the unused fraction to their spouse or civil partner, up to a set amount. Individuals cannot make use of this provision if their spouse or partner pays more than the basic rate of tax. For 2025/26 the maximum that can be transferred is £1,260.
This can save the higher-earning partner up to £252 in tax each year. To qualify, one partner must be a non-taxpayer or earn below the Personal Allowance, and the other must be a basic rate taxpayer only.
Blind Person's Allowance
The Blind Person's Allowance for 2025/26 is set at £3,130. It has been increased in line with inflation from 2024/25. This is added on top of your standard Personal Allowance, giving eligible individuals a combined tax-free amount of £15,700. If the allowance cannot be fully used, it can be transferred to a spouse or civil partner.
ISA Allowance: Tax-Free Income Planning
Dividends from shares held in a Stocks and Shares ISA are tax free and do not count toward your £500 dividend allowance. In 2025/26, you can save up to £20,000 tax free in ISAs. With both the Dividend Allowance and the Personal Savings Allowance being squeezed, making full use of your annual ISA allowance has become an increasingly practical way to shelter income from tax.
Quick Reference Checklist
Use this checklist to confirm you are making the most of the Personal Tax Allowance and related reliefs:
- Check your tax code is 1257L if you receive the standard Personal Allowance
- If your income is approaching £100,000, consider pension contributions to protect your allowance
- Claim Marriage Allowance if one partner earns below £12,570 and the other is a basic rate taxpayer
- Use your £20,000 ISA allowance to shelter savings interest and dividends from tax
- If you receive rental income above £1,000, decide whether to claim the £1,000 property allowance or deduct actual expenses
- If you receive dividends above £500 outside an ISA, register for Self-Assessment or contact HMRC
- Check whether the Starting Rate for Savings applies if your non-savings income is below £17,570
- If you are registered blind, ensure the Blind Person's Allowance is applied to your tax code
Making Tax Digital: What Is Coming Next
Making Tax Digital for Income Tax will begin from 6 April 2026 for sole traders and landlords with qualifying income over £50,000, unless they are exempt. Qualifying income means total gross income from self-employment and property before expenses or tax. HMRC also states that those with qualifying income over £30,000 for 2025/26 will be brought in from 6 April 2027, and the government has set out plans to lower the threshold to £20,000 from a later stage.
If you are a landlord or self-employed individual who is likely to fall within the rules, now is a good time to make sure your record-keeping is digital and up to date.
Conclusion
The Personal Allowance remains frozen at £12,570 until April 2031, so rising wages, rents and investment income could gradually push more people into higher tax bands. Landlords may still benefit from the £1,000 property allowance or Rent a Room relief, while investors should consider using ISAs to protect dividend income.
It is also worth checking your tax code, claiming any allowances you are entitled to, and making sure all taxable income is reported correctly. Higher earners nearing £100,000 may be able to protect their Personal Allowance through pension contributions, but professional advice can help identify the best option for your circumstances.
Frequently Asked Questions
Non residents with UK income can claim the Personal Allowance by completing form R43 through HMRC. This applies to income like wages, pensions, and rental income.
Yes, the Personal Allowance applies to most UK income, including wages, pensions, and rental income. However, state benefits and tax exempt income aren’t included in taxable income.
No, you cannot claim both allowances on the same income source. You must choose between the Rent a Room Scheme or the £1,000 property allowance.
Most UK taxpayers are affected by the Personal Allowance, which is £12,570 for 2025/26. If your adjusted net income is over £100,000, the allowance is reduced, and it is fully withdrawn at £125,140.
If your rental income is under £1,000, you don’t need to report it. However, if other taxable income exceeds allowances or you file a return, you must include it.
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