What is the UK Personal Allowance?
The UK Personal Allowance is the slice of income each individual can earn in a tax year before paying any income tax. For 2026/27 it is GBP 12,570, frozen since 2021/22, and it tapers away above GBP 100,000 of adjusted net income, vanishing entirely at GBP 125,140.
Detailed definition
The Personal Allowance has been the foundation of UK income tax since the Pay-As-You-Earn (PAYE) system was introduced in 1944, though its modern form dates to Nigel Lawson's 1988 Budget. It is administered through your tax code (the standard 2026/27 code is 1257L, where the digits represent the allowance divided by 10) and applied automatically by employers and pension payers when calculating PAYE deductions each pay period.
Frozen by the March 2021 Budget and extended in November 2022, the allowance has lost meaningful real value: had it tracked CPI from April 2021 it would be roughly GBP 16,000 by 2026/27. This silent fiscal drag has pulled an estimated 4.4 million extra people into income tax and 1.6 million into the higher-rate band according to OBR projections, the largest revenue-raising measure of the decade.
The Personal Allowance applies to total income from employment, self-employment, pensions, rental property, dividends, savings interest, and most other taxable sources. HMRC allocates it to non-savings, non-dividend income first by default. Anyone with adjusted net income above GBP 100,000 starts losing the allowance, and a small but growing group of additional-rate taxpayers (income above GBP 125,140) gets no allowance at all.
How it works
Personal Allowance (2026/27) = GBP 12,570 (standard) If ANI <= GBP 100,000 PA = GBP 12,570 If ANI > GBP 100,000 PA = max(0, 12,570 - (ANI - 100,000) / 2) If ANI >= GBP 125,140 PA = GBP 0 ANI = total taxable income minus pension contributions and Gift Aid
- ANI = Adjusted Net Income. Salary, bonuses, dividends, savings, rental and self-employment minus gross pension contributions and grossed-up Gift Aid donations.
- Basic rate (20%) applies to the next GBP 37,700 of taxable income above the allowance, taking you to GBP 50,270 total.
- Higher rate (40%) applies from GBP 50,270 to GBP 125,140 total income.
- Additional rate (45%) applies above GBP 125,140, with no allowance remaining.
- Scotland uses six bands above the allowance; Wales and Northern Ireland mirror the rest-of-UK rates.
Worked example
Consider Aisha, who earns a GBP 110,000 salary in England with no pension contributions, no Gift Aid, and no other income in 2026/27.
- Adjusted Net Income: GBP 110,000 (no adjustments).
- Allowance taper: (110,000 - 100,000) / 2 = GBP 5,000 of allowance is lost.
- Remaining Personal Allowance: 12,570 - 5,000 = GBP 7,570.
- Tax-free band: GBP 0 to GBP 7,570 (zero tax).
- Basic rate band: GBP 7,570 to GBP 45,270 at 20 percent = GBP 7,540 of tax.
- Higher rate band: GBP 45,270 to GBP 110,000 at 40 percent = GBP 25,892 of tax.
- Total income tax: GBP 33,432 (before NI and student loan).
The GBP 100K trap and how to avoid it
The slice of income between GBP 100,000 and GBP 125,140 is the most punitive band in UK income tax. Adding student loan repayments (9 percent above GBP 27,295 for Plan 2 or 9 percent above GBP 21,000 for Plan 1) and the high-income child benefit charge can push the effective marginal rate above 70 percent for parents.
| Income band 2026/27 | Marginal income tax | Effective rate including PA loss | Plus 2% employee NI |
|---|---|---|---|
| GBP 12,570 to GBP 50,270 | 20% | 20% | 28% |
| GBP 50,270 to GBP 100,000 | 40% | 40% | 42% |
| GBP 100,000 to GBP 125,140 | 40% | 60% | 62% |
| GBP 125,140 plus | 45% | 45% | 47% |
The two clean escapes are pension contributions and Gift Aid, both of which reduce adjusted net income for the purpose of the taper. Salary sacrifice is more efficient than personal contributions because it also avoids employee NI on the sacrificed amount.
Related terms
Related calculators on 3Tej
See exactly how the Personal Allowance, basic-rate band, and the GBP 100K taper affect your own take-home pay with these free UK calculators:
Frequently asked questions
What is the UK Personal Allowance for 2026/27?
The standard Personal Allowance for the 2026/27 UK tax year is GBP 12,570. It has been frozen at this level since the 2021/22 tax year and is currently scheduled to remain frozen until April 2028 under the policy set in the November 2022 Autumn Statement.
How does the GBP 100,000 Personal Allowance taper work?
Once your adjusted net income exceeds GBP 100,000 in a tax year, your Personal Allowance is reduced by GBP 1 for every GBP 2 of income above that threshold. At GBP 125,140 of adjusted net income the entire GBP 12,570 allowance has been clawed back, which means the slice of income between GBP 100,000 and GBP 125,140 is effectively taxed at 60 percent (40 percent income tax plus the lost allowance).
Can I transfer my Personal Allowance to my spouse?
Yes, through the Marriage Allowance. A non-taxpaying spouse or civil partner can transfer up to GBP 1,260 (10 percent of the standard allowance) to a basic-rate-paying partner, worth up to GBP 252 in tax savings for 2026/27. Both partners must be born after 6 April 1935 and the recipient must not be a higher or additional rate taxpayer.
Does the Personal Allowance apply to Scottish taxpayers?
Yes. The Personal Allowance is set by the UK government and applies across all four nations. Scotland sets its own income tax rates and bands above the Personal Allowance, but the GBP 12,570 starting point is the same for Scottish, Welsh, English, and Northern Irish taxpayers.
Do dividends and savings interest use the Personal Allowance?
Yes, the Personal Allowance can be set against any type of income including employment, self-employment, rental, pension, dividend, and savings interest. HMRC generally allocates it to non-savings income first (because that is taxed at the lowest dividend and savings rates only after the PA is used), but you can request a different allocation in some cases.
How can I avoid losing my Personal Allowance above GBP 100,000?
The most common move is to make pension contributions or Gift Aid donations, which reduce your adjusted net income for taper purposes. A GBP 5,000 pension contribution by someone earning GBP 110,000 brings their adjusted net income to GBP 105,000, recovers GBP 2,500 of allowance, and combined with the 40 percent tax relief on the contribution itself produces an effective marginal saving rate of around 60 percent.
Sources and further reading
- HMRC (2026) Income Tax rates and Personal Allowances, gov.uk. The official 2026/27 thresholds.
- HMRC (2026) Marriage Allowance, gov.uk. Eligibility and how to claim.
- HM Treasury (2022) Autumn Statement - the policy freezing thresholds to April 2028.
- Office for Budget Responsibility (2024) Economic and Fiscal Outlook - fiscal-drag estimates for the threshold freeze.
- MoneySavingExpert (2026) Marriage Tax Allowance guide.