A quick-reference guide to the tax-free allowances available in the UK — including the Personal Allowance, trading allowance, savings allowance, dividend allowance, and more.
Tax information is based on HMRC rules for the 2026/27 tax year. Tax rules can change — always verify current rates at GOV.UK. This is not tax advice. Consider consulting a qualified tax adviser for your personal situation.
Contents
For a comprehensive overview of income tax, see our Income Tax guide.
Everyone in the UK gets several tax-free allowances. Here is every allowance you can use to earn income without paying tax.
The standard answer is £12,570 — but that’s only the beginning. Stack up all the available allowances and a typical employee can earn considerably more before paying a penny of tax. A basic-rate taxpayer with a side hustle, some savings, and a small investment portfolio could shelter over £15,000 in income from tax each year, without any complex planning.
Some allowances are automatic: the £12,570 Personal Allowance applies to nearly everyone and is factored into your tax code. Others require you to know they exist and sometimes to claim them actively — particularly the trading allowance for side income, the starting rate for savings, and the Marriage Allowance.
The Short Answer
Most people can earn £12,570 per year tax-free from employment or self-employment. But there are additional allowances on top of this.
Complete Tax-Free Allowances — 2025/26 and 2026/27
Allowance
Tax-free amount
What it covers
Personal Allowance
£12,570 per year
Employment income, self-employment profits, pension income
Trading Allowance
£1,000 per year
Side income from self-employment or casual work
Property Allowance
£1,000 per year
Income from renting property (e.g. spare room via Airbnb)
Rent a Room Scheme
£7,500 per year
Income from letting a furnished room in your home
Personal Savings Allowance (basic rate)
£1,000 per year
Interest from savings accounts
Personal Savings Allowance (higher rate)
£500 per year
Interest from savings accounts
Personal Savings Allowance (additional rate)
£0
No allowance — all interest taxed
Starting Rate for Savings
Up to £5,000
If your non-savings income is below £12,570
Dividend Allowance
£500 per year
Dividends from shares or your own company
ISA Allowance
£20,000 per year
All returns within ISAs — interest, dividends, capital gains
Capital Gains Tax Annual Exempt Amount
£3,000 per year
Profits from selling assets (shares, property, crypto)
Marriage Allowance
£1,260 transfer
Transfer 10% of Personal Allowance to spouse/civil partner
Junior ISA
£9,000 per year
Savings and investments for under-18s — tax-free
Lifetime ISA
£4,000 per year (within ISA allowance)
25% government bonus for house purchase or retirement
National Insurance threshold
£12,570 per year
No NI on earnings below this (employees)
Trivial benefits (employed)
£50 per benefit
Small non-cash benefits from your employer
Pension Annual Allowance
£60,000 per year
Tax relief on pension contributions
Income Tax Bands — 2025/26 and 2026/27
Band
Rate
Taxable income
Personal Allowance
0%
£0–£12,570
Basic rate
20%
£12,571–£50,270
Higher rate
40%
£50,271–£125,140
Additional rate
45%
Over £125,140
Scotland has different tax bands:
Band
Rate
Taxable income
Personal Allowance
0%
£0–£12,570
Starter rate
19%
£12,571–£16,537
Basic rate
20%
£16,538–£29,526
Intermediate rate
21%
£29,527–£43,662
Higher rate
42%
£43,663–£75,000
Advanced rate
45%
£75,001–£125,140
Top rate
48%
Over £125,140
National Insurance Thresholds — 2026/27
Threshold
Amount
NI rate
Below Primary Threshold
Under £12,570/year
0%
Primary Threshold to Upper Earnings Limit
£12,571–£50,270/year
8% (employees)
Above Upper Earnings Limit
Over £50,270/year
2% (employees)
Self-employed NI (Class 4):
Threshold
NI rate
Below Lower Profits Limit (£12,570)
0%
£12,571–£50,270
6%
Over £50,270
2%
Common Scenarios — Tax-Free Income
The table below shows how the various allowances combine in practice for different types of earner. The key insight is that most of these allowances stack — they’re separate from each other rather than subtracted from the same pot.
Scenario
Tax-free amount
Employee, no savings or investments
£12,570
Employee with savings interest
£12,570 + £1,000 savings allowance = £13,570
Employee with dividends
£12,570 + £500 dividend allowance = £13,070
Employee with side hustle under £1,000
Employment income up to £12,570 tax-free + £1,000 trading allowance on top
Self-employed only income
£12,570 (or £13,570 if income under £17,570 and uses starting rate for savings)
Renting out a spare room
£7,500 Rent a Room + £12,570 Personal Allowance on other income
Student with a part-time job
£12,570 — students get the full Personal Allowance
Pensioner (State Pension only)
State Pension is taxable but if under £12,570, no tax to pay
ISA saving
Any amount within £20,000/year ISA limit — all returns tax-free, no limit on total pot
The £100,000 Trap — Losing Your Personal Allowance
Income
Personal Allowance
Effective marginal rate
Up to £100,000
£12,570
40%
£100,001
£12,569.50
60%
£110,000
£7,570
60%
£120,000
£2,570
60%
£125,140
£0
40% (back to normal higher rate)
Over £125,140
£0
45%
Between £100,000 and £125,140, your effective marginal tax rate is 60% because you’re losing £1 of Personal Allowance for every £2 earned.
How to Avoid the £100,000 Trap
Strategy
Effect
Pension contributions
Reduce adjusted net income below £100,000
Salary sacrifice
Same effect — reduces your taxable income
Gift Aid donations
Extend your basic rate band and can reduce adjusted net income
Spreading income over tax years
If possible, defer bonuses or income to a lower-earning year
Key Facts
Question
Answer
When does the tax year start?
6 April
When does the tax year end?
5 April
Will the Personal Allowance increase?
Frozen at £12,570 until at least April 2031 (extended from April 2028 at the November 2025 Budget)
Is the State Pension taxable?
Yes — but collected through reduced Personal Allowance on other income, not through a tax code on the pension itself
Do children pay tax?
Yes, if they earn over £12,570 — they have the same Personal Allowance as adults
Is Universal Credit taxable?
No — benefits are generally not taxable
Students and Young People — Tax-Free Earnings
Students have the same Personal Allowance as everyone else — there’s no special rate. This is widely misunderstood: many students doing holiday work or part-time jobs are put on emergency tax codes by default and can end up paying tax they don’t owe. If you’re a student who has been taxed and your total earnings for the year are below £12,570, you can claim a full refund from HMRC.
Situation
Tax-free amount
Student with part-time job
£12,570/year (same as adults)
Student working summer holidays
£12,570/year (pro-rata applies)
Gap year worker
£12,570/year
Apprentice
£12,570/year
Paper round / babysitting (under £1,000)
Often covered by trading allowance
Common Student Tax Mistakes
Mistake
Solution
Emergency tax on first job
Apply for tax refund via P50 or wait until tax year end
Multiple jobs not coded correctly
Contact HMRC to split Personal Allowance
Not claiming refund after leaving
Submit P85 if leaving UK or wait for automatic refund
Paying tax on bank interest
PSA usually covers — claim back if overpaid
Side Hustle Tax Rules — The £1,000 Trading Allowance
If you have a side hustle alongside a main job, you get extra tax-free income.
Type of side income
Allowance
On top of Personal Allowance?
Selling on eBay/Vinted
£1,000
Yes — separate allowance
Freelance work (Fiverr, Upwork)
£1,000
Yes
Tutoring
£1,000
Yes
Dog walking, cleaning
£1,000
Yes
Delivering for Deliveroo/Uber
£1,000 (if self-employed)
Yes
Renting room via Airbnb
£1,000 property allowance OR £7,500 Rent a Room
Yes
Car boot sales (personal items)
Usually not taxable
N/A
When You Must Register with HMRC
Income level
Action required
Under £1,000
No action needed — don’t even need to tell HMRC
£1,000–£12,570 (only income)
Register as self-employed but no tax to pay
Over £1,000 (with employment)
Register, complete Self Assessment, claim trading allowance OR deduct expenses