Whether you’re employed, self-employed or unemployed, you will have what is known as a “Personal Allowance” in the UK. It’s never clearly stated on payslips, but it’s there and it plays a significant role in how your income tax is calculated.
But what is the Personal Allowance? How much is it? Are there any exceptions? Let’s find out.
What is the Personal Allowance?
Each year, each UK resident has a “Personal Allowance”. This is the amount of income you can earn, per tax year, before paying any Income Tax. Even if you earn above this amount (unless earning over £100,000 – more on that later), you will only pay income tax on the amount over the Personal Allowance.
For the 2023/2024 tax year, up until April 2028, the standard Personal Allowance is:
- £12,570 per year
- £1,047.50 per month
- £241.07 per week
Each new tax year, HMRC sends out a letter detailing your Personal Allowance for that tax year, along with your tax code.
If you don’t have this at hand and are unsure how much your Personal Allowance is, you can calculate it simply by looking at your UK tax code, which can be found on payslips or by logging into your Government Gateway account.
Fun fact: children and students also have a Personal Allowance!
What are the Exceptions?
There are a few exceptions to how much Personal Allowance you can have. I’ll cover three of the main ones below.
Those Earning Over £100,000
If you earn over £100,000 per year, then your Personal Allowance is reduced by £1 for every £2 extra you earn, until the Personal Allowance reaches £0.
For example, someone earning £115,000 will have their Personal Allowance reduced by £7,500 that year.
Therefore, someone earning £125,140 per year will no longer be entitled to the Personal Allowance.
NOTE: Any reduction in Personal Allowance is taxed at the 40% income tax rate! This effectively results in a 60% tax rate between £100,000 and £125,140!
Marriage Allowance
If you are married or in a civil partnership, it is possible to ‘transfer’ some of your unused Personal Allowance to your partner. This is only applicable if one person in the marriage earns over the Personal Allowance threshold, while the other does not earn enough to pay Income Tax (i.e., do not use their full Personal Allowance).
For 2023/2024, you can transfer a maximum of £1,260 of your Personal Allowance to your partner, increasing their Personal Allowance. This would save them up to £252 per year in income tax.
To qualify:
- You need to be married or in a civil partnership
- One of you needs to be a non-taxpayer, i.e., earns less than £12,570 per year if eligible for the standard Personal Allowance
- The other partner needs to be a basic rate (20%) taxpayer, earning more than £12,570, but less than £50,270.
NOTE: You can also backdate your claim up to 4 years, giving you an up to £1,242 lump sum payment!
Blind Person’s Allowance
The Blind Person’s Allowance is an additional amount of tax-free allowance, on top of the standard Personal Allowance (which again, is £12,570 for 2023/2024). In other words, those eligible can earn more money before you begin paying Income Tax.
This tax benefit is for those who are registered as blind or severely sight impaired. Unlike the Personal Allowance, the Blind Person’s Allowance will rise in April 2023.
For 2023/2024, the Blind Person’s Allowance is £2,870, taking the Personal Allowance from £12,570 to £15,440. This is a tax saving of £574 per year if earning above this amount.
Just like with the Marriage Allowance, you can ‘transfer’ your Blind Person’s Allowance to your spouse or civil partner if you do not pay tax or earn enough to use all of your allowance.
How Do I Claim?
Marriage Allowance:
Simply apply online via the Gov website, here.
Blind Person’s Allowance:
Simply call HMRC (Telephone: 0300 200 3301), and they’ll go through the process with you.
