Personal Tax Allowance 2024

Personal Tax Allowance

IN THIS ARTICLE

Every taxpayer in the UK has a personal tax allowance.

Whether you’re an employee checking that you’re being paid correctly, or you’re self-employed and wanting to know how much to set aside for your annual self-assessment tax bill, it’s important to understand how your tax liability is calculated. Your personal tax allowance is a key factor in calculating your tax bill.

In this guide, we explain what the personal tax allowance is, and how it works in relation to calculating taxable income.

 

What is the personal tax allowance?

 

Both those in paid employment and working on a self-employed basis are liable to pay income tax in the UK. This is collected by HMRC on behalf of the government, and is used to help provide funding for public services, such as for the NHS, education and the welfare system, as well as investment in public projects, like roads, railways and housing.

If you’re employed, income tax is typically collected at source, deducted from your wages by your employer under the PAYE scheme, and is paid directly to HMRC.

If you’re self-employed, income ta is paid a year in arrears through self-assessment.

Income tax is charged on most types of income, including money you earn from employment and any net profits that you make if you run your own business. You will also be liable to pay income tax on certain state benefits, pensions, interest and dividends from savings and investments, and on any rental income from property that you let out as a landlord.

However, you don’t usually pay income tax on all of your taxable income. This is because each taxpayer resident in the UK gets a personal allowance of tax-free income. This is the amount of income that you can earn before you are liable to pay any tax, and can be offset against any type of income for income tax purposes. Some people may also qualify for more than one type of personal tax allowance, including the marriage allowance or blind person’s allowance.

 

When does the tax year run for the personal tax allowance?

 

The tax year runs from 6 April to 5 April, where a person will be able to earn up to their personal tax allowance for that year without paying tax.

 

How much is the personal tax allowance in 2024?

 

For the tax years 2024/2025 and 2023/24, the personal tax allowance is £12,570 for most taxpayers.

The personal tax allowance is the amount of income you do not have to pay tax on within a tax year. This means that if you earn less than this amount, you usually won’t have to pay any income tax, although you may still be liable to pay National Insurance (NI) if you earn over the relevant threshold for NI contributions.

If you earn more than £12,570, tax is paid on the amount of taxable income remaining after your personal allowance has been deducted.

However, your personal tax allowance can be both higher or lower, depending on how much you earn, and whether or not you’re entitled to any additional allowance.

If your incomes exceeds £100,000, the rate of personal tax allowance will reduce.

If you’re entitled to claim an additional allowance, such as marriage allowance or blind person’s allowance, your personal allowance might be higher.

 

Blind person’s allowance 2024

 

The blind person’s allowance is an extra amount of tax-free allowance that is added to the standard personal tax allowance of £12,570.

For the tax year 2023/2024, the blind person’s allowance is £2,870, meaning those who are registered as blind or severely sight impaired can currently earn £15,440 before they start paying any income tax.

For the tax year 2024/2025, the blind person’s allowance is £3,070, meaning those who are registered as blind or severely sight impaired can currently earn £15,640 before they start paying any income tax.

If someone has insufficient income to make use of this allowance, it can also be transferred to their spouse or civil partner, even if they’re not blind.

 

Marriage allowance 2024

 

Marriage allowance allows eligible couples, where one person’s income is insufficient to make full use of their personal tax allowance, to transfer an unused portion to their spouse or civil partner, up to a maximum of £1,260.

This represents around 10% of their tax-free allowance, the net effect being that this will reduce the tax liability of the other person by up to £252.

You can benefit from marriage allowance if you’re either married or in a civil partnership, you don’t pay income tax or your income is below your personal allowance, and your partner pays income tax at the basic rate of 20%. This usually means that their income is between £12,571 and £50,270. You cannot claim marriage allowance if you’re living together as an unmarried couple.

When you transfer some of your personal allowance to your spouse or civil partner you might have to pay more tax yourself, depending on how much you earn, but this means that you could still pay less overall as a couple.

For example, if you earn £11,500, with no other income, you do not pay tax, as this falls below your standard personal allowance of £12,570. If your partner’s income is £20,000, again with a personal allowance of £12,570, they will pay tax on £7,430. By claiming marriage allowance, your personal allowance becomes £11,310 and your partner will get a tax credit on £1,260 of their taxable income. You will now need to pay tax on £190, but your partner will only pay tax on £6,170. As a couple you will benefit, as you’re only paying income tax on £6,360 rather than £7,430, which will save you £214 in tax.

Read out detailed guide to the Marriage Allowance here.

 

Income Tax Additional Rate Threshold (ART)

 

If you’re a high earner, your personal tax allowance may be lower as the standard allowance of £12,570 is reduced by £1 for every £2 above the income threshold of £100,000, until it reaches zero.

Since 6 April 2023, the Income Tax Additional Rate Threshold (ART) was lowered from £150,000 to £125,140. This is the level at which someone no longer has any personal allowance. This is because £1 of the personal allowance is being withdrawn for every £2 of income above £100,000 from 6 April 2023. This means that if you earn £125,140, you will be liable to pay income tax on everything you earn, without any entitlement to a tax-free allowance.

 

How personal tax allowance works

 

How much income tax you pay in each tax year will depend on how much of your income is above your personal tax allowance and how much falls within each tax band.

Income tax is made up of several different bands, where you don’t pay tax at the same rate on all of your income. This means, as your income increases, so does the amount of tax you pay.

Income tax on income from paid employment or self-employed earnings is charged at three rates: the basic rate, the higher rate and the additional rate. The three rates are 20%, 40% and 45% respectively.

Below we show both the rates and bands without the personal tax allowance, as well as the tax rates you pay in each band if you apply the standard personal allowance of £12,570:

 

Taxable Income

Tax Band

Tax Rate 2023 to 2024

Tax Rate 2024 to 2025

£0 to £12,570 per year Personal Allowance Nil Nil
£12,571 to £37,700 per year Basic Rate 20% 20%
£37,701 to £125,140 per year Higher Rate 40% 40%
Over £125,140 Additional Rate 45% 45%

 
 

Taxable income for £10,000 salary

 

Taxable Income: £10,000 (Salary) – £12,570 (Personal Allowance) = £-2,570 (Negative value means no income tax liability)

Tax Payable: £0. Since the taxable income is negative, no tax is due.

 

Taxable income for £25,000 salary

 

Taxable Income: £25,000 (Salary) – £12,570 (Personal Allowance) = £12,430.

Tax Payable: £12,430 x 20% (Basic Rate) = £2,486.

 

Taxable income for £40,000 salary

 

Taxable Income: £40,000 (Salary) – £12,570 (Personal Allowance) = £27,430.

Tax Payable: £27,430 x 20% (Basic Rate) = £5,486.

 

Taxable income for £60,000 salary

 

Taxable Income: £60,000 (Salary) – £12,570 (Personal Allowance) = £47,430.

Tax Payable: £12,570 (Lower band) x 0% (Basic Rate) + £34,860 (Taxable income exceeding lower band) x 20% (Basic Rate) = £6,972.

 

Other tax-free allowances and reliefs

 

There are a number of other tax-free allowances that may be applicable to you and your circumstances, including tax-free allowances for savings interest and dividends, if you own company shares, and trading and property allowances. For example, you’re entitled to a trading allowance of the first £1,000 for income from self-employment or a property allowance of the first £1,000 on income from any property that you rent out as a landlord.

To calculate your liability to income tax, the basic formula is to add up all your taxable income, including taxable state benefits, work out your tax-free allowances and deduct these allowances away from your taxable income. For the current tax year, you can see your payments and work out how much income tax you should be paying. You can also check how much tax you paid last year, and estimate how much income tax you should have paid in a previous year. There’s also a ready reckoner to budget for your self-assessment if you work for yourself.

If you cannot use the online tools and calculators, you can instead check that you’ve paid the right tax by either contacting HMRC or by getting help from an accountant. If you’re self-employed, or earn additional income outside of any wages or salary from paid employment, your tax affairs can become complex, where an expert can help to identify all applicable personal tax allowances to help minimise your overall liability to income tax. You may even be entitled to an unexpected income tax rebate which they can help you to claim.

 

Personal Tax Allowance FAQs

 

What is the Personal Tax Allowance?

 

The Personal Tax Allowance is the amount of income you can earn each tax year (April 6th to April 5th) before income tax starts being deducted. It essentially acts as a tax-free threshold.

 

How much is the Personal Tax Allowance?

 

The Personal Tax Allowance amount changes from year to year. For the tax year 2024-2025, the standard Personal Tax Allowance is £12,570.

 

Do I get the full Personal Tax Allowance?

 

In some cases, your Personal Tax Allowance might be reduced or even disappear.  Your allowance is gradually reduced if your income exceeds the Additional Rate Threshold (ART) of £125,140 or more for the 2024-2025 tax year.  Receiving benefits like Child Benefit might also affect your allowance.

 

How does the Personal Tax Allowance affect my tax bill?

 

As an example, if your income is £20,000 and the Personal Tax Allowance is £12,570. The first £12,570 of your income wouldn’t be taxed. You’d only pay income tax on the remaining £7,430.

 

Can I claim the Personal Tax Allowance if I’m self-employed?

 

Yes, the Personal Tax Allowance applies to self-employed individuals as well. You’ll need to declare your income on a Self Assessment tax return.

 

How can I find out my exact Personal Tax Allowance?

 

You can check your Personal Tax Allowance through various methods. If you’re employed, your payslip might show your tax code, which indirectly reflects your allowance. You can access your Personal Tax Allowance through HMRC’s online portal once you’ve registered. Your P45 issued by your previous employer details your earnings and tax paid in the past year, including your allowance.

 

What if I think I’m not getting the correct Personal Tax Allowance?

 

If you believe your Personal Tax Allowance is incorrect, you can contact HMRC to discuss your situation.

 

Legal disclaimer

 

The matters contained in this article are intended to be for general information purposes only. This article does not constitute legal or financial advice, nor is it a complete or authoritative statement of the law or tax rules and should not be treated as such.

Whilst every effort is made to ensure that the information is correct, no warranty, express or implied, is given as to its accuracy and no liability is accepted for any error or omission.

Before acting on any of the information contained herein, expert professional advice should be sought.

Author

Gill Laing is a qualified Legal Researcher & Analyst with niche specialisms in Law, Tax, Human Resources, Immigration & Employment Law.

Gill is a Multiple Business Owner and the Managing Director of Prof Services Limited - a Marketing & Content Agency for the Professional Services Sector.

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