What is the Personal Allowance?

Definition of the Personal Allowance

The Personal Allowance is the amount of income each individual is entitled to receive free of tax each year.

The basic Personal Allowance for the tax year 2024/25 is £12,570.

For taxpayers whose adjusted net income is over £100,000, the Personal Allowance is reduced by £1 for every £2 received over £100,000. As such, and individual whose income is over £125,140 won't receive any income tax-free; their Personal Allowance will have been reduced to £0.

Applying the Personal Allowance

Depending on what income you receive, your Personal Allowance is applied in different ways.

If you're self-employed and have no other income, you'll take your Personal Allowance off your profit before working out how much Income Tax to pay.

If you're a salaried employee, your employer will apply your Personal Allowance to your wages when they are working out how much income tax to deduct from your wages, usually with the help of payroll software. They do this by way of your tax code.

Disclaimer: The content included in this glossary is based on our understanding of tax law at the time of publication. It may be subject to change and may not be applicable to your circumstances, so should not be relied upon. You are responsible for complying with tax law and should seek independent advice if you require further information about the content included in this glossary. If you don't have an accountant, take a look at our directory to find a FreeAgent Practice Partner based in your local area.

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