By Chandraketu Tripathi · Updated April 2026 · Fact-checked Tax · April 2026The personal allowance — the amount you can earn before paying any income tax — has been frozen at £12,570 since 2021/22. In 2026/27, it remains at £12,570 for the sixth consecutive year, with the freeze now extended to April 2028. As wages continue to rise, this freeze is one of the most significant stealth tax increases affecting UK workers — pulling hundreds of thousands more people into higher tax bands every year.
What Is the Personal Allowance?The personal allowance is the amount of income you can receive in a tax year without paying any income tax. It applies to earnings from employment, self-employment, pensions and most other income sources. Everyone born after 5 April 1938 is entitled to the basic personal allowance of £12,570 — unless their income exceeds £100,000, at which point it is gradually reduced. Fiscal Drag — The Hidden Tax RiseFiscal drag occurs when tax thresholds are not increased in line with inflation or wage growth. As your earnings rise but the personal allowance stays the same, a larger proportion of your income becomes taxable. In practical terms: a worker earning £30,000 in 2021 paid income tax on £17,430. If that worker now earns £35,000 (a 16% pay rise in line with wage growth), they pay tax on £22,430 — an increase of £1,000 in taxable income without any change in the headline tax rate. The OBR estimates that the personal allowance freeze will pull approximately 3.7 million additional people into paying income tax and around 1.5 million more into the higher rate band by 2028. This represents one of the largest stealth tax increases in recent history. 💡 The most effective response to the frozen personal allowance is pension contributions. Every pound you contribute to a pension reduces your taxable income by £1 — meaning you pay tax on less, and your effective personal allowance increases relative to your take-home income. For higher earners, this is especially powerful around the £50,270 and £100,000 thresholds. Who Loses Their Personal Allowance?If your income exceeds £100,000, your personal allowance is reduced by £1 for every £2 of income above that threshold. At £125,140, the personal allowance disappears entirely. This creates an effective marginal tax rate of 60% on income between £100,000 and £125,140 — one of the highest marginal rates in the developed world for this income range. Marriage Allowance — Transfer Up to £1,260If you are married or in a civil partnership and one partner earns below the personal allowance, they can transfer up to £1,260 of their unused allowance to their partner. This reduces the higher earner's tax bill by up to £252 per year. An estimated 2 million couples are eligible but have not claimed — check eligibility at gov.uk/marriage-allowance. ⭐ OUR VERDICT The personal allowance freeze at £12,570 until at least 2028 means UK workers are paying more tax in real terms every year as wages rise. The most effective responses are: maximise pension contributions to reduce taxable income, claim the Marriage Allowance if eligible (worth up to £252/year), use your ISA allowance to shelter savings interest from tax, and claim all eligible workplace reliefs including salary sacrifice. If your income is between £100,000 and £125,140, pension contributions can restore your personal allowance and save 60p in tax for every £1 contributed. Frequently Asked QuestionsWhat is the personal allowance for 2026/27? The personal allowance for 2026/27 is £12,570 — unchanged since 2021/22 and frozen until at least April 2028. You pay no income tax on the first £12,570 of income from all sources combined. Does the personal allowance apply to pension income? Yes. The personal allowance applies to all income including State Pension, private pension income, employment earnings and savings interest. If your total income from all sources is below £12,570, you pay no income tax. Many pensioners with the full State Pension (£12,534/year from April 2026) are just below the personal allowance — any additional income could create a small tax liability. What happens to the personal allowance if I earn over £100,000? Your personal allowance is reduced by £1 for every £2 you earn above £100,000. At £125,140, the allowance disappears entirely. This creates an effective marginal tax rate of 60% on income in this range. Making pension contributions to bring adjusted net income below £100,000 restores the allowance. When will the personal allowance increase? The personal allowance has been frozen at £12,570 since 2021/22. The freeze is currently planned to continue until April 2028, after which the government has not confirmed whether it will increase in line with inflation or remain frozen. There is no confirmed date for an increase. |
Personal Allowance UK 2026/27: £12,570 — What It Means for Your Tax
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