Understanding your tax allowances is essential for minimising your tax bill. The UK offers a range of allowances that let you earn income, make gains, and receive dividends and savings interest without paying tax — but many people do not use them all. This guide covers every key allowance for the 2025/26 tax year.
Personal Allowance
The amount of income you can earn before paying any income tax:
| Tax Year | Personal Allowance |
|---|---|
| 2025/26 | £12,570 |
| 2024/25 | £12,570 |
| 2023/24 | £12,570 |
The allowance has been frozen at £12,570 since 2021/22 and is expected to remain at this level until at least 2027/28.
The £100,000 Trap
Your personal allowance is reduced by £1 for every £2 of income above £100,000. This creates an effective 60% marginal tax rate on income between £100,000 and £125,140:
| Income | Personal Allowance | Effective Marginal Rate |
|---|---|---|
| Up to £100,000 | £12,570 | 40% |
| £100,001–£125,140 | Reducing to £0 | 60% |
| Above £125,140 | £0 | 40% (or 45% above £150,000) |
If you earn close to £100,000, consider pension contributions or salary sacrifice to bring income below the threshold and restore your full allowance.
Income Tax Bands
| Band | Taxable Income | Rate |
|---|---|---|
| Personal allowance | Up to £12,570 | 0% |
| Basic rate | £12,571–£50,270 | 20% |
| Higher rate | £50,271–£125,140 | 40% |
| Additional rate | Above £125,140 | 45% |
National Insurance Thresholds
For employees (2025/26):
| Threshold | Amount | NI Rate |
|---|---|---|
| Primary threshold | £12,570/year | 0% below this |
| Upper earnings limit | £50,270/year | 8% between thresholds |
| Above UEL | Above £50,270 | 2% |
See our National Insurance guide for full details.
Savings Allowances
Personal Savings Allowance (PSA)
| Tax Band | PSA Amount |
|---|---|
| Basic rate | £1,000 |
| Higher rate | £500 |
| Additional rate | £0 |
Savings interest within your PSA is tax-free without needing an ISA.
Starting Rate for Savings
If your total non-savings income is below £17,570, you may qualify for the starting rate for savings — up to £5,000 of savings income taxed at 0%. The £5,000 is reduced by every £1 of non-savings income above £12,570.
This mainly benefits people with very low other income — for example, retirees with a small pension and savings.
Dividend Allowance
| Tax Year | Dividend Allowance |
|---|---|
| 2025/26 | £500 |
| 2024/25 | £500 |
| 2023/24 | £1,000 |
Dividends above the allowance are taxed at:
| Band | Rate |
|---|---|
| Basic rate | 8.75% |
| Higher rate | 33.75% |
| Additional rate | 39.35% |
See our dividend tax guide for more.
Capital Gains Tax Annual Exempt Amount
| Tax Year | Exempt Amount |
|---|---|
| 2025/26 | £3,000 |
| 2024/25 | £3,000 |
| 2023/24 | £6,000 |
The first £3,000 of capital gains each year is tax-free. See our capital gains tax guide.
ISA Allowance
| Allowance | 2025/26 |
|---|---|
| Total ISA allowance | £20,000 |
| Lifetime ISA (within total) | £4,000 |
| Junior ISA | £9,000 |
All ISA returns are completely tax-free — no income tax, no CGT, no dividend tax. See types of ISA explained.
Pension Allowances
| Allowance | 2025/26 |
|---|---|
| Annual allowance | £60,000 |
| Money purchase annual allowance | £10,000 |
| Carry forward (up to 3 years) | Unused allowance from previous 3 years |
The pension lifetime allowance was abolished from April 2024. See our pension annual allowance guide.
Marriage Allowance
If one partner earns below £12,570 and the other is a basic rate taxpayer, transfer up to £1,260 of personal allowance — saving £252/year. Can be backdated four years. See our marriage allowance guide.
Trading and Property Allowances
| Allowance | Amount |
|---|---|
| Trading allowance | £1,000 |
| Property allowance | £1,000 |
| Rent-a-room relief | £7,500 |
These let you earn small amounts from side income, casual trading, and renting a room without paying tax or filing a return.
Other Notable Allowances
| Allowance | 2025/26 |
|---|---|
| Inheritance tax nil rate band | £325,000 |
| Residence nil rate band | £175,000 |
| Annual gift exemption | £3,000 |
| Blind person’s allowance | £3,070 |
| Employment allowance (employers) | £10,500 |
How to Make the Most of Your Allowances
- Use your ISA allowance — tax-free returns; use it or lose it each year
- Maximise pension contributions — tax relief is the most generous available
- Claim marriage allowance — if eligible, apply and backdate
- Use the CGT annual exempt amount — crystallise gains each year up to £3,000
- Check your tax code — ensure your personal allowance is fully reflected
- Consider salary sacrifice — reduces taxable income, preserving allowances
- Spread income — if you control timing, spread across tax years to stay in lower bands
See our tax relief guide for more strategies to reduce your tax bill.