What is the personal allowance?

Hi, I’m Nicolette, and the question I’m here to answer is: what is the personal allowance?

Your personal allowance is the amount of money you can earn in a tax year without having to pay income tax. 

At the moment, it’s £12,570. 

So let’s say you earn £30,000 per year.

You wouldn’t need to pay tax on that whole figure – just on the amount above the personal allowance. 

And the amount of tax you pay will depend on the income tax band you fall into. 

But if you earn less than the personal allowance, you usually won’t have to pay tax at all.

Keep in mind your personal allowance may be different depending on your circumstances. For example, it could be higher if you’re receiving marriage or blind person’s allowance. If you earn over £100,000, it might be lower, or you might lose it altogether. 

Money taken from a pension plan also counts as income. So if your pension withdrawals mean you’re getting more than £12,570 in a tax year, you could have tax to pay. 

Don’t forget, things like the State Pension and some state benefits will count towards the personal allowance too.