Wikipedia

Personal allowance

In the UK tax system, personal allowance, typically £12,570[1] in tax year 2025-26, is the threshold above which income tax is levied on an individual's taxable income. Taxable income is money earned from employment, profits from self-employment, some state benefits, most pensions including state pensions, rental income, benefits from a job, income from a trust, and interest on savings[2]. A person who has taxable income below their personal allowance in a given tax year does not pay income tax; otherwise, tax must be paid on income above personal allowance.

There is an additional blind person's allowance of £3,130[3]. The marriage allowance allows a person earning less than £12,570 to transfer £1,260 of personal allowance to a husband, wife or civil partner[4]. Historical additional allowances for married couples[5] and age related allowances for over-65s and over-75s[6] have been phased out.

From April 2010 personal allowance is tapered for people earning over £100,000 a year: for every £2 earned above £100,000 the personal allowance is reduced by £1 until incomes above £125,140 have zero personal allowance[1]. The additional £2 of income and the £1 removed from the tax free allowance are taxed at 40%, resulting in £1.20 ((2 + 1) * 40%) tax being paid for every additional £2 of income, a marginal tax rate of 60% (1.20 / 2 * 100) on incomes between £100,000 and £125,140.

There are additional tax allowances on income from savings interest[7] and on rental income for resident landlords[8]. Earnings from capital gains[9], and dividends[10] have different tax thresholds and are taxed at different rates to income tax. Individuals also pay National Insurance Contributions an additional tax on income (paid at different rates by employees and employers).

History

[edit]

The trajectory of the value of the personal allowance in recent years, both in real terms and relative to earnings, is recorded by the Institute for Fiscal Studies.[11] The allowance was raised significantly between 2010 and 2020, but has more recently fallen in real terms while (projected to 2027) remaining above the 2010 level.

On 22 June 2010, the new Chancellor George Osborne, as part of the coalition deal which sought to increase the Personal Allowance to £10,000 from April 2015 per Lib Dem policy,[12] made the first increase of £1,000, making it £7,475 for the 2011-12 tax year.[13] During the 2011 Budget, the allowance was raised by £630 to £8,105 from April 2012.[citation needed] In 2013, George Osborne revised the plans to increase the Personal Allowance and bring forward the date at which it would reach the £10,000 target. This resulted in the allowance being raised to £9,440 from April 2013, before being increased to £10,000 from April 2014, a year earlier than originally planned.[14][15][16]

Married Man's allowance

[edit]

Married Man's allowance was the allowance for a legally married couple. The allowance was given at the man's highest rate of tax. During the early-1990s, then-Chancellor of the Exchequer, Norman Lamont overhauled the allowance and introduced the 10% allowance,[clarification needed] which meant that all men had the same amount of money in their pocket,[clarification needed] irrespective of highest tax rate. The allowance was scrapped from April 2000, first being announced in then-Chancellor Gordon Brown's 1999 budget,[17][18] with the exception of people married, or in civil partnerships (introduced in 2005) where one spouse was born before 6 April 1935.

History of allowances

[edit]
Year Allowance (£)
Age under 65 Age 65 & over
1976-77 735 [19] 1,010[19]
1977-78 945 [20] 1,250[20]
1978-79 985 [21] 1,300[21]
1979-80 1,165 [22] 1,540[22]
1980-81 1,375 [22] 1,820[22]
1981-82 1,375 [22] 1,820[22]
1982-83 1,565[23] 2,070[23]
1983-84 1,785[24] 2,360[24]
1984-85 2,005[25] 2,490[25]
1985-86 2,205[26] 2,690[26]
1986-87 2,335[27] 2,850[27]
Age under 65 Age 65-79 Age 80 & over
1987-88 2,425[28] 2,960[28] 3,070[28]
1988-89 2,605[29] 3,180[29] 3,310[29]
Age under 65 Age 65-74 Age 75 & over
1990–91 3,005 3,670[6] 3,820[6]
1991–92 3,295 4,020 4,180
1992–93 3,445 4,200 4,370
1993–94 3,445 4,200 4,370
1994–95 3,445 4,200 4,370
1995–96 3,525 4,200 4,370
1996–97 3,765 4,910 5,090
1997–98 4,045 5,220 5,400
1998–99 4,195 5,410 5,600
1999–00 4,335 5,720 5,980
2000–01 4,385 5,790 6,050
2001–02 4,535 5,990 6,260
2002–03 4,615 6,100 6,370
2003–04 4,615 6,610 6,720
2004–05 4,745 6,830 6,950
2005–06 4,895 7,090 7,220
2006–07 5,035 7,280 7,420
2007–08 5,225[30] 7,550 7,690
2008–09 6,035 9,030 9,180
2009–10 6,475 9,490 9,640
2010–11 6,475 9,490 9,640
2011–12 7,475 9,940 10,090
2012–13 8,105[6] 10,500[6] 10,600[6]
2013–14 9,440[31] 10,500 10,660
2014–15 10,000[31] 10,500 10,660
2015–16 10,600[32] -
2016–17 11,000[32] -
2017–18 11,500[33] -
2018–19 11,850[34] -
2019–20 12,500[35][36] -
2020–21 12,500[37] -
2021–22 12,570[38] -
2022–23 12,570[39][40] -
2023–24 12,570[41][40] -
2024–25 12,570[40] -
2025–26 12,570[40] -

See also

[edit]

References

[edit]
  1. ^ a b "Income Tax rates and Personal Allowances". Retrieved 27 August 2025.
  2. ^ "Income Tax: introduction". Retrieved 27 August 2025.
  3. ^ "Blind Person's Allowance". Retrieved 27 August 2025.
  4. ^ "Marriage Allowance". Retrieved 27 August 2025.
  5. ^ "The History of Marriage Tax Allowance". 5 December 2023. Retrieved 27 August 2025.
  6. ^ a b c d e f "Age-related personal allowance" (PDF). 10 September 2019. p. 27. Retrieved 27 August 2025.
  7. ^ "Tax on savings interest". Retrieved 27 August 2025.
  8. ^ "Rent a room in your home". Retrieved 27 August 2025.
  9. ^ "Capital Gains Tax: what you pay it on, rates and allowances". Retrieved 27 August 2025.
  10. ^ "Tax on dividends". Retrieved 27 August 2025.
  11. ^ "Personal Allowance Over Time". IFS. Retrieved 27 July 2024.>
  12. ^ Wall, Emma (21 May 2010). "How does the Budget affect me? Income Tax". The Daily Telegraph. London.
  13. ^ "Emergency Budget 22 June 2010". HM Revenue & Customs. Retrieved 25 June 2010.
  14. ^ Dassanayake, Dion (20 March 2013). "Budget 2013: Personal tax allowance rise to £10,000 brought forward 12 months". Express.co.uk.
  15. ^ Hall, James (22 March 2012). "Budget 2012: Hidden blow in raised personal tax allowance". The Daily Telegraph. London. Archived from the original on 23 March 2012.
  16. ^ Mason, Rowena (20 March 2013). "Budget 2013: Millions of workers get £100 tax cut". The Daily Telegraph. London.
  17. ^ "Gordon Brown: A decade of Budgets". BBC News. 18 March 2007.
  18. ^ Whitehead, Tom; Hope, Christopher (1 January 2009). "Married couples 'punished by tax system'". The Daily Telegraph. London.
  19. ^ a b "income-tax-allowances". 24 February 1977.
  20. ^ a b "Finance (Income Tax Reliefs) Act 1977".
  21. ^ a b "1979 BUDGET EXPLANATORY TABLES" (PDF).
  22. ^ a b c d e f "Historical Information on the UK Tax Regime. Historical Tax rates and Allowances".
  23. ^ a b "Economy: 1982 Budget (Howe 4) | Margaret Thatcher Foundation". www.margaretthatcher.org.
  24. ^ a b "Economy: 1983 Budget (Howe 5) | Margaret Thatcher Foundation". www.margaretthatcher.org.
  25. ^ a b "Economy: 1984 Budget (Lawson 1) | Margaret Thatcher Foundation". www.margaretthatcher.org.
  26. ^ a b "Economy: 1985 Budget (Lawson 2) | Margaret Thatcher Foundation". www.margaretthatcher.org.
  27. ^ a b "Economy: 1986 Budget (Lawson 3) | Margaret Thatcher Foundation". www.margaretthatcher.org.
  28. ^ a b c "Economy: 1987 Budget (Lawson 4) | Margaret Thatcher Foundation". www.margaretthatcher.org.
  29. ^ a b c "Economy: 1988 Budget (Lawson 5) | Margaret Thatcher Foundation". www.margaretthatcher.org.
  30. ^ "Rates and Allowances - Income Tax". HM Revenue & Customs. Retrieved 30 May 2009.
  31. ^ a b Collinson, Patrick (20 March 2013). "2013 & 2014 Personal Allowances". the guardian. London. Retrieved 21 March 2013.
  32. ^ a b "Income Tax rates and allowances for current and past years". GOV.UK.
  33. ^ "Budget 2015: As it happened". BBC News. 18 March 2015.
  34. ^ "Summary of Budget 2017: Key points at-a-glance". 22 November 2017 – via www.bbc.co.uk.
  35. ^ "Budget 2020: What we already know about our changing finances". BBC News. 6 March 2020. Retrieved 20 March 2020.
  36. ^ "At-a-glance summary: Budget key points". BBC News. 29 October 2018. Retrieved 29 October 2018.
  37. ^ "Budget 2020: What we already know about our changing finances". BBC News. 6 March 2020. Retrieved 20 March 2020.
  38. ^ "Rates and thresholds for employers 2021 to 2022". 2 February 2021. Retrieved 3 February 2021.
  39. ^ "Rates and thresholds for employers 2022 to 2023". 7 February 2022. Retrieved 27 August 2025.
  40. ^ a b c d "Income Tax rates and allowances for current and previous tax years". 6 April 2025. Retrieved 27 August 2025.
  41. ^ Seely, Antony; Masala, Francesco (8 January 2024). "Direct taxes: rates and allowances 2023/24". Retrieved 27 August 2025.
[edit]