Tax Free Allowance UK 2026/27: How Much Can You Earn Before Paying Tax?
Last Updated On – 05-10-2026
For the 2026/27 tax year, the standard UK Personal Allowance is £12,570. For most people, this means the first £12,570 of taxable income can be received without paying Income Tax.
Dividing the annual allowance gives £1,047.50 a month or approximately £241.73 a week.
However, HMRC’s PAYE tables use rounded payroll thresholds of £1,048 per month and £242 per week, so those are the figures employees may see used in payroll calculations.
The £12,570 figure is only the starting point. Savings interest, dividends, small amounts of self-employment income, property income, capital gains, ISA contributions and pension contributions all have their own allowances or tax rules.
High earners can also lose some or all of their Personal Allowance.
How Much Can You Earn Tax Free in the UK in 2026/27?
For most UK taxpayers, £12,570 is the basic answer.
The UK tax year runs from 6 April to 5 April, so the £12,570 Personal Allowance applies across the whole 2026/27 tax year rather than the calendar year.
For someone with a standard Personal Allowance and ordinary employment income in England, Wales or Northern Ireland:
| Annual income | Income Tax position |
| Up to £12,570 | Normally no Income Tax |
| £12,571 to £50,270 | Basic rate applies to taxable income above the allowance |
| £50,271 to £125,140 | Higher rate applies to income within this band |
| Above £125,140 | Additional rate applies and no Personal Allowance remains |
One important distinction is that £12,570 is an Income Tax allowance, not a guarantee that every deduction from your payslip will be zero.
National Insurance, pension contributions, student loan repayments and other deductions operate under separate rules.
For a standard category A employee in 2026/27, employee National Insurance is normally 8% on earnings between the Primary Threshold and Upper Earnings Limit and 2% above that level. The annual Primary Threshold is also £12,570.
UK Tax Free Allowances for 2026/27
The Personal Allowance is only one of several important allowances.
| Allowance or relief | 2026/27 amount | What it covers |
| Personal Allowance | £12,570 | Most taxable income |
| Marriage Allowance transfer | £1,260 | Transfer between eligible spouses/civil partners, producing up to £252 tax saving |
| Personal Savings Allowance | £1,000 basic-rate / £500 higher-rate / £0 additional-rate | Savings interest |
| Starting rate for savings | Up to £5,000 | Savings interest for people with sufficiently low non-savings income |
| Dividend Allowance | £500 | Dividend income |
| Trading Allowance | £1,000 | Gross trading or qualifying miscellaneous income |
| Property Allowance | £1,000 | Qualifying property income |
| Rent a Room threshold | £7,500 | Furnished accommodation in a main home |
| Capital Gains Tax annual exempt amount | £3,000 | Taxable capital gains for individuals |
| ISA annual subscription limit | £20,000 | Tax-advantaged ISA savings/investments |
| Pension annual allowance | Normally £60,000 | Tax-relieved pension saving, subject to separate tax-relief rules |
| Blind Person’s Allowance | £3,250 | Additional allowance for eligible taxpayers |
| Married Couple’s Allowance | Maximum £11,700 / minimum £4,530 | Tax reduction where at least one spouse/civil partner was born before 6 April 1935 |
These allowances cannot simply be added together and treated as one giant tax-free salary allowance. Each applies to a particular type of income, gain, saving or contribution and has its own eligibility conditions.
Income Tax Bands for England, Wales and Northern Ireland
Assuming the full £12,570 Personal Allowance is available, the main 2026/27 bands are:
| Income | Rate |
| £0 to £12,570 | 0% under Personal Allowance |
| £12,571 to £50,270 | 20% |
| £50,271 to £125,140 | 40% |
| Above £125,140 | 45% |
The bands work like a staircase. Moving into the 40% band does not mean all of your income suddenly becomes taxable at 40%. Only the portion falling within that band is taxed at the higher rate.
Example 1: Earning £25,000
Someone earning £25,000 with no other taxable income and the full Personal Allowance has:
£25,000 − £12,570 = £12,430 taxable income
At 20%, the Income Tax is approximately:
£12,430 × 20% = £2,486
This is Income Tax only and does not include National Insurance, workplace pensions, student loans or other deductions.
Example 2: Earning £52,000
The first £12,570 is covered by the Personal Allowance.
The next £37,700 is taxed at 20%:
£37,700 × 20% = £7,540
The remaining £1,730 is taxed at 40%:
£1,730 × 40% = £692
Total Income Tax is therefore approximately £8,232.
Example 3: Earning £110,000
This case is different because the Personal Allowance starts to disappear once adjusted net income exceeds £100,000.
At £110,000, the income is £10,000 above the taper threshold. One pound of Personal Allowance is lost for every £2 over £100,000, so £5,000 of allowance disappears.
The remaining Personal Allowance is:
£12,570 − £5,000 = £7,570
Taxable income becomes £102,430.
The first £37,700 is taxed at 20%, producing £7,540 of tax. The remaining £64,730 is taxed at 40%, producing £25,892.
Total Income Tax is approximately £33,432, before considering other income, reliefs or deductions.
What Happens to the Personal Allowance Above £100,000?
One of the most important parts of the UK tax system is often missing from simple “how much can I earn tax free?” explanations.
When adjusted net income exceeds £100,000, the Personal Allowance falls by £1 for every £2 of additional income.
| Adjusted net income | Personal Allowance |
| £100,000 | £12,570 |
| £105,000 | £10,070 |
| £110,000 | £7,570 |
| £120,000 | £2,570 |
| £125,140 or more | £0 |
This produces the well-known effective 60% marginal Income Tax rate on employment income between £100,000 and £125,140 in England, Wales and Northern Ireland.
A taxpayer pays 40% higher-rate tax on the extra income while simultaneously losing Personal Allowance, creating another effective 20% charge.
The calculation is based on adjusted net income, not simply the headline salary shown on an employment contract.
Certain pension contributions and Gift Aid donations can reduce adjusted net income.
For example, HMRC says qualifying relief-at-source pension contributions and Gift Aid payments are grossed up when adjusted net income is calculated. This can sometimes restore part of a lost Personal Allowance.
Anyone around this income level should consider individual tax advice before making major pension or charitable-contribution decisions.
How Does the Personal Allowance Work Through PAYE?
For employees and many pensioners, the Personal Allowance is reflected in the PAYE tax code.
The most common code is 1257L. The number broadly represents £12,570 of tax-free income, while the letter L indicates entitlement to the standard Personal Allowance.
If a payslip does not appear to give the expected allowance, it is worth checking whether your tax code is correct rather than assuming that the £12,570 threshold has changed.
HMRC normally spreads an employee’s allowance across the tax year. Under a normal cumulative code, payroll considers pay and tax accumulated during the tax year, which can correct some earlier over- or under-deductions automatically.
For employees who want to check year-to-date pay and tax figures, their P45 and P60 tax records are also useful evidence.
Savings Interest: How Much Can You Receive Tax Free?
Savings have their own rules. Three different allowances can potentially affect savings interest: unused Personal Allowance, the starting rate for savings and the Personal Savings Allowance.
Personal Savings Allowance
For 2026/27:
| Tax band | Personal Savings Allowance |
| Basic-rate taxpayer | £1,000 |
| Higher-rate taxpayer | £500 |
| Additional-rate taxpayer | £0 |
Starting Rate for Savings
The starting rate can provide up to £5,000 of savings interest at 0%, but it depends on other taxable income.
It is incorrect to describe this simply as an allowance for everyone earning below £12,570.
If non-savings income is below £17,570, some starting-rate band may be available. Every £1 of non-savings income above the Personal Allowance reduces the £5,000 starting-rate band by £1.
For example, someone with £16,000 of wages has £3,430 of income above the £12,570 Personal Allowance. That reduces their £5,000 starting-rate band to £1,570.
The starting rate can operate alongside the Personal Savings Allowance where the conditions are met. GOV.UK guidance on tax-free savings interest
Dividend Allowance for 2026/27
The Dividend Allowance is now only £500.
Dividend income above the allowance is taxed according to the taxpayer’s applicable band. For 2026/27, the rates are:
| Dividend band | 2026/27 rate |
| Ordinary/basic | 10.75% |
| Upper/higher | 35.75% |
| Additional | 39.35% |
The allowance has fallen significantly from the £2,000 available in 2022/23. The ordinary and upper dividend tax rates also increased from 6 April 2026.
Trading Allowance for a Side Hustle
People earning money from self-employment, freelancing or certain casual activities may qualify for the £1,000 trading allowance.
This is separate from savings income.
Where qualifying gross trading income is £1,000 or less, it may be covered by the allowance, although exceptions and reporting requirements can still apply.
When gross income exceeds £1,000, a taxpayer may in some circumstances choose the trading allowance instead of deducting actual business expenses.
The allowance relates to gross income, not profit after expenses. HMRC’s trading and property allowance rules
Self-employed people should also remember that Income Tax and National Insurance are different calculations. In 2026/27, Class 4 National Insurance is generally 6% on self-employed profits between £12,570 and £50,270 and 2% above £50,270.
Property Allowance and Rent a Room
There is a separate £1,000 property allowance for qualifying property income.
A taxpayer with both qualifying trading income and qualifying property income can potentially have a £1,000 allowance for each. The two should not be combined into the savings-interest rules.
For someone letting furnished accommodation in their only or main home, the Rent a Room Scheme can instead provide a tax-free threshold of £7,500 a year.
It is generally halved to £3,750 where the income is shared with someone else. GOV.UK Rent a Room Scheme rules
The property allowance and Rent a Room Scheme cannot simply be claimed against the same income.
Capital Gains Tax Allowance
Income Tax allowances should not be confused with Capital Gains Tax.
For 2026/27, the Capital Gains Tax annual exempt amount is:
| Taxpayer | Annual exempt amount |
| Individuals and personal representatives | £3,000 |
| Most trusts | £1,500 |
This allowance relates to gains, not the total sale proceeds from an asset. GOV.UK Capital Gains Tax rates and allowances
ISA Allowance
For 2026/27, an eligible saver can subscribe up to £20,000 across ISAs.
Interest, dividends and qualifying investment gains generated within an ISA receive the relevant ISA tax advantages and do not use the ordinary Personal Savings Allowance or Dividend Allowance in the same way as investments held outside an ISA. GOV.UK ISA rules
There is an important change coming in April 2027, discussed later in this article.
Pension Contributions: The £60,000 Annual Allowance
Older versions of this article referred to a pension Lifetime Allowance of around £1.07 million. That is no longer the current system.
The Lifetime Allowance was abolished from 6 April 2024. Separate limits now apply to certain tax-free pension lump sums.
For 2026/27, the standard pension annual allowance is £60,000.
Two different limits must not be confused:
Tax relief on an individual’s pension contributions is generally limited by relevant UK earnings. HMRC states that eligible contributions can normally receive relief up to the higher of 100% of UK taxable earnings or £3,600, subject to the detailed rules.
The pension annual allowance is normally £60,000 and measures pension saving across relevant arrangements, including employer contributions.
It can be lower for some people, including high earners and those who have flexibly accessed defined-contribution pension savings.
For the tapered annual allowance in 2026/27, the key high-income tests are threshold income above £200,000 and adjusted income above £260,000. This replaces the outdated £240,000 figure that applied in some earlier tax years.
Marriage Allowance and Other Personal Reliefs
Marriage Allowance allows an eligible lower-earning spouse or civil partner to transfer £1,260 of Personal Allowance to their partner.
It does not mean £1,260 is simply deducted from taxable income in every case. The maximum tax saving for the receiving partner is normally £252, reflecting 20% of £1,260. GOV.UK Marriage Allowance rules
The Blind Person’s Allowance is £3,250 for 2026/27 and can be added to the Personal Allowance where the eligibility conditions are met.
There is also a separate Married Couple’s Allowance for qualifying married couples or civil partners where at least one person was born before 6 April 1935.
For 2026/27, the maximum allowance is £11,700 and the minimum is £4,530, with relief given at 10%. It is a different relief from Marriage Allowance.
Do Pensioners Get the Same Tax Free Allowance?
Yes. Pensioners do not receive a separate general age-related Personal Allowance under the current system. The standard Personal Allowance is normally £12,570, subject to the same high-income taper.
Pension income can be taxable. This includes the State Pension, workplace pensions and private pensions, although separate tax-free pension lump-sum rules can apply.
The full new State Pension is £241.30 per week in 2026/27, equivalent to £12,547.60 over 52 weeks. That is only £22.40 below the £12,570 standard Personal Allowance.
This makes the frozen Personal Allowance particularly important for pensioners.
If someone receives the State Pension plus a private pension, HMRC will generally collect tax due on the State Pension through the PAYE code attached to the private pension.
If the State Pension is the person’s only income and tax is due, HMRC can currently use Simple Assessment. GOV.UK guidance on how pension tax is collected
The Low Incomes Tax Reform Group expects the full new State Pension to exceed the £12,570 Personal Allowance in 2027/28 because the allowance remains frozen while the State Pension continues to rise under the triple lock.
The government has discussed an easement for some people whose sole income is the basic or new State Pension, but detailed implementation has been a developing policy area, so pensioners should check the final 2027/28 rules rather than assuming the State Pension itself has become generally tax-free.
Why Am I Paying Tax Before I Have Earned £12,570?
This is one of the most common misunderstandings surrounding the tax-free allowance.
Paying tax before total annual earnings reach £12,570 does not automatically mean HMRC has removed the Personal Allowance.
Several situations can produce deductions earlier than expected.
Emergency Tax Codes
Emergency codes such as 1257L W1, 1257L M1 or 1257L X calculate tax using the current pay period rather than the employee’s full cumulative position.
This can happen after starting a new job, receiving certain employment benefits or when HMRC does not yet have complete information.
See how an emergency tax code works in the UK if W1, M1, X or NONCUM appears on a payslip.
A Second Job May Use BR
You only receive one Personal Allowance overall.
If the allowance is being used against the main job, a second employment may use BR, meaning income from that source is taxed at the basic rate.
The distinction is covered in more detail in iBusinessTalk’s explanation of whether BR is an emergency tax code.
Taxable Benefits Can Reduce the Code
Company cars, private medical insurance and other taxable benefits may reduce the amount of tax-free pay included in a tax code.
A person entitled to £12,570 of Personal Allowance therefore does not necessarily receive a 1257L code if HMRC needs to account for benefits or untaxed income.
Previous Underpayments Can Be Collected Through PAYE
HMRC can sometimes adjust a tax code to collect tax that was underpaid previously.
That means more tax may be deducted from current salary even though the standard Personal Allowance itself remains £12,570.
K Tax Codes Work Differently
A K code can be used when amounts HMRC needs to account for — such as untaxed income, State Pension, taxable benefits or previous underpayments — exceed available allowances.
K codes effectively add an amount to taxable pay for PAYE purposes rather than providing tax-free pay. There is a safeguard preventing PAYE tax deducted under a K code from exceeding 50% of the relevant pre-tax payment.
Anyone seeing one should check what a K tax code means for their pay before assuming payroll has made an error.
Common UK Tax Codes Explained
| Tax code | Broad meaning |
| 1257L | Standard Personal Allowance for many people with one job or pension |
| 1257L CUMUL | 1257L operated cumulatively using tax-year pay and tax information |
| BR | All income from that particular source taxed at basic rate |
| 0T | No Personal Allowance allocated to that employment or pension |
| K | Coding deductions exceed available allowances |
| S prefix | Scottish Income Tax rates apply |
| C prefix | Welsh Income Tax rates apply |
| W1 / M1 / X / NONCUM | Emergency or non-cumulative PAYE treatment |
HMRC confirms that 1257L is the code currently used for many people with one job or pension, while BR, 0T, K, S and C have distinct PAYE meanings. GOV.UK tax code meanings
Someone seeing 1257L with normal cumulative treatment can also read what 1257L CUMUL means on a payslip.
Tax Free Allowance by Situation
| Situation | Key point |
| Employee | Usually receives Personal Allowance through PAYE unless the tax code adjusts it |
| Self-employed person | Same Personal Allowance; trading allowance may also apply to qualifying gross trading income |
| Side-hustle worker | £1,000 trading allowance may be relevant, but it is not another £1,000 salary allowance |
| Student | Uses the same Personal Allowance as other taxpayers; there is no separate student Income Tax allowance |
| Landlord | Personal Allowance may cover taxable profit, while property allowance or Rent a Room rules may also be relevant |
| Pensioner | State and private pension income can be taxable; the standard Personal Allowance generally applies |
| High earner | Personal Allowance starts tapering once adjusted net income exceeds £100,000 |
| Non-UK resident | Eligibility for the Personal Allowance depends on residence, nationality and treaty or other qualifying rules |
Being a student, pensioner or self-employed does not by itself create a completely different standard Personal Allowance.
Can Non-UK Residents Get the Personal Allowance?
Not every non-UK resident automatically receives a UK Personal Allowance.
Eligibility can depend on factors such as British or certain other qualifying citizenship, UK government service, or provisions in a double-taxation agreement.
Someone who is non-resident but has UK income should therefore establish whether they are actually entitled to the allowance rather than automatically deducting £12,570 from UK taxable income.
Why the £12,570 Allowance Is Becoming More Important?
The Personal Allowance has been frozen at £12,570 for several years. Finance Act 2026 extends the freeze through the 2030/31 tax year, meaning the threshold is scheduled to remain £12,570 until 5 April 2031.
When wages, pensions and other nominal incomes rise but tax thresholds do not, more income moves into taxable bands. This is commonly called fiscal drag.
It can affect people who never receive an above-inflation pay rise. A worker whose salary merely rises with prices can eventually start paying Income Tax or enter a higher band because the threshold itself has not moved.
The same effect is becoming particularly visible for State Pension recipients because the full new State Pension is now only £22.40 below the Personal Allowance on a 52-week calculation.
What Changes From 6 April 2027?
There are already important confirmed changes relevant to this topic.
Cash ISA Limit Falls for Under-65s
The overall ISA subscription limit will remain £20,000, but from 6 April 2027 the amount an investor under 65 can subscribe to Cash ISAs will be limited to £12,000.
For people aged 65 or over, the Cash ISA limit will remain £20,000. HMRC published the implementing changes in September 2026.
Savings Income Tax Rates Rise
From 6 April 2027, savings-income rates are set at:
| Band | Savings rate from 2027/28 |
| Basic | 22% |
| Higher | 42% |
| Additional | 47% |
These changes apply UK-wide. The Personal Savings Allowance and starting rate for savings remain in place under the announced rules.
Separate Property Income Rates
From April 2027, the new property-income rates for England, Wales and Northern Ireland are set at 22% basic, 42% higher and 47% additional under the legislated changes.
These are future 2027/28 rules and should not be applied when calculating 2026/27 liabilities.
How Have Major Tax Free Allowances Changed?
The recent history shows why an article quoting old allowance figures can quickly become misleading.
| Tax year | Personal Allowance | Dividend Allowance | CGT annual exempt amount for individuals |
| 2022/23 | £12,570 | £2,000 | £12,300 |
| 2023/24 | £12,570 | £1,000 | £6,000 |
| 2024/25 | £12,570 | £500 | £3,000 |
| 2025/26 | £12,570 | £500 | £3,000 |
| 2026/27 | £12,570 | £500 | £3,000 |
The Personal Allowance has remained unchanged while both the Dividend Allowance and Capital Gains Tax annual exempt amount have been cut sharply.
What Should You Do If You Think You Have Paid Too Much Tax?
Start by checking the tax code on the payslip or pension statement against HMRC’s records.
Then compare the income and tax deducted with relevant payroll documents. A P45 records pay and tax when leaving employment, while a P60 summarises employment pay and tax for someone still employed at the end of the tax year.
If the figures suggest an overpayment, check whether HMRC may owe you a tax rebate and confirm the correct HMRC procedure for the circumstances.
HMRC provides different routes depending on why tax was overpaid. Form P50 can apply in certain current-year cases after someone stops working, while R38 can be used to claim certain Income Tax repayments by post or nominate someone to receive a repayment.
GOV.UK guidance on the P50 refund process GOV.UK guidance on R38 refunds
Do not submit a refund form simply because tax appeared on a payslip before annual earnings reached £12,570. First establish whether cumulative PAYE, an emergency code, a second job, taxable benefits or another coding adjustment explains the deduction.
Frequently Asked Questions
How much can I earn before paying tax in the UK in 2026/27?
Most people can receive £12,570 of taxable income before paying Income Tax. The allowance starts to reduce once adjusted net income exceeds £100,000.
How much is the tax free allowance per month?
£12,570 divided by 12 is £1,047.50. HMRC’s PAYE tables use a rounded monthly threshold of £1,048 for 2026/27.
How much is the tax free allowance per week?
The annual allowance divided by 52 is about £241.73. HMRC uses £242 per week as the PAYE threshold.
Can I earn more than £12,570 without paying any tax?
Potentially, depending on the type of income. Savings, dividends, trading income and property income have separate allowances, but they are not simply added to your salary Personal Allowance.
Why am I being taxed when I have not earned £12,570 yet?
PAYE operates through tax codes and pay periods. Emergency codes, BR on a second job, benefits in kind, previous underpayments, 0T or K codes can all result in earlier deductions.
Is 1257L the correct tax code for 2026/27?
1257L is the standard code used for many people entitled to the full £12,570 allowance, but it is not correct for everyone. Other income, employment benefits, multiple jobs or adjustments can change the code.
Is the State Pension tax free?
No. State Pension income is taxable. The full new State Pension is £241.30 a week in 2026/27, or £12,547.60 over 52 weeks, which is just below the standard Personal Allowance.
Do I pay tax on a side hustle under £1,000?
The £1,000 trading allowance can exempt qualifying gross trading income in many cases, but exclusions and reporting requirements apply. It is based on gross receipts rather than simply taxable profit.
Is the tax free allowance different in Scotland?
The standard Personal Allowance remains £12,570, but Scotland has different Income Tax rates and bands for non-savings and non-dividend income.
Does Wales have a different Personal Allowance?
No. The standard Personal Allowance is £12,570. Welsh taxpayers use Welsh rates and normally have a C prefix on PAYE tax codes, although the main 2026/27 rates currently match England and Northern Ireland.
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