Personal Allowance

The Personal Allowance is the amount of income you can receive in a tax year before income tax is due. For 2026/27 the standard allowance is £12,570, and it reaches you through your tax code: 1257L instructs your employer to treat £12,570 of your pay as tax-free, divided evenly across your pay periods, which frees £1,047.50 a month on a monthly payroll.

It is not available to everyone in full. The allowance tapers once adjusted net income passes £100,000, losing £1 for every £2 of income above that point, and is gone entirely at £125,140. Inside that band the effective marginal rate is 60 per cent, because each extra pound is taxed at 40 per cent and also strips 50p of allowance that had been untaxed. Pension contributions and gift aid reduce adjusted net income, which is why a contribution made inside that band is worth considerably more than its headline relief suggests.

Other allowances sit alongside it. Blind Person's Allowance is added on top. Marriage Allowance moves a tenth of one partner's allowance to the other where the transferor is a non-taxpayer and the recipient pays the basic rate, and it shows as an N code on the partner giving it up and an M code on the partner receiving it.

The allowance is a UK-wide figure and is reserved to Westminster. Scotland sets its own rates and bands but not the allowance, so a Scottish taxpayer receives the same amount and then pays Scottish rates on the balance. If you have more than one job, HMRC normally gives the whole allowance to one of them and codes the other at the basic rate, which is the correct arithmetic even though it makes the second job look heavily taxed. Splitting the allowance across two jobs is possible and is worth asking for only when neither job alone uses all of it.