Personal Tax Allowance UK 2025/26

The personal tax allowance UK 2025/26 stands at £12,570, the income that an individual can earn before income tax becomes payable. The figure has been frozen since April 2021 and remains frozen through to the end of the 2027/28 tax year under Finance Act 2022. Above £100,000 of adjusted net income, the allowance tapers at the rate of £1 of allowance lost for every £2 of income above the threshold, reaching zero at £125,140. The freeze, combined with rising nominal wages, has materially expanded the number of higher-rate taxpayers in the UK, per HMRC Income Tax statistics and OBR fiscal forecasts.

The personal allowance is £12,570 for the 2025/26 tax year

The personal allowance is £12,570 for the 2025/26 tax year, the same figure it has held since April 2021, and remains the income that an individual can earn before income tax becomes payable. The allowance is set out in HMRC Income Tax rates and allowances guidance and codified in Finance Act 2022. It applies uniformly across the UK, including Scotland, since Scottish income tax devolution under the Scotland Act 2016 covers rates and bands but not the personal allowance itself. The allowance is deducted from gross taxable income before any rate is applied, with the residual taxed in bands.

The allowance is not the same as the standard tax code for PAYE purposes, though they are linked. HMRC uses the 1257L code as the default for most taxpayers, signalling a £12,570 allowance to the employer's payroll system. Variations from the standard code arise where the individual has additional income, benefits in kind, or prior-year adjustments.

The freeze through 2028 was extended by the November 2022 Autumn Statement

The personal allowance freeze was originally legislated in Finance Act 2021 for the period 2022/23 to 2025/26, and extended by two further years in the November 2022 Autumn Statement and Finance Act 2022 to cover 2026/27 and 2027/28. The original freeze accompanied the March 2021 Budget. The Treasury used the freeze as a discreet revenue-raising mechanism that avoided the political cost of a rate rise, while delivering substantial revenue through fiscal drag. OBR scoring of the freeze across both phases identifies it as one of the largest single fiscal measures in the current parliament.

The freeze applies in nominal terms only. The real value of the allowance has fallen with CPI since 2021, with the cumulative real reduction depending on the inflation outturn over the freeze period. Pre-freeze practice was to uprate the allowance by CPI under section 57 of the Income Tax Act 2007, a mechanism Finance Act 2022 disapplies for the freeze period.

The personal allowance tapers between £100,000 and £125,140

The personal allowance is reduced by £1 for every £2 of adjusted net income above £100,000, under section 35 of the Income Tax Act 2007, eliminating the allowance entirely at £125,140 of adjusted net income. The taper creates an effective marginal income tax rate of 60% on income in the £100,000 to £125,140 band, since the loss of the £12,570 allowance at 40% adds to the underlying 40% on the income itself. The 60% trap has been a continued feature of the UK income tax system since the taper was introduced in 2010, with no government legislating its removal.

The taper applies to adjusted net income, which is taxable income less pension contributions paid gross (or grossed up), less gift aid donations (grossed up), and less certain trading losses. The same definition is used for the High Income Child Benefit Charge. The structure creates a strong arbitrage in favour of additional pension contributions or gift aid donations for taxpayers around the £100,000 threshold.

HMRC data shows 1.2 million additional higher-rate taxpayers since the freeze began

HMRC published analysis identifies a significant expansion in the higher-rate taxpayer population since the personal allowance and higher rate threshold freeze began in April 2021. The mechanism is fiscal drag: as nominal wages rise with inflation and pay settlements, the share of income taxed at the 40% rate increases automatically without any rate change. The OBR has scored the freeze as the single largest source of fiscal drag in the current UK fiscal framework, with the higher-rate population now well above 6 million per Income Tax statistics.

The growth in higher-rate taxpayers is uneven across the income distribution. The largest growth has been at the lower end of the higher-rate band, where employees previously taxed at 20% have crossed the £50,270 threshold through normal pay rises. The Treasury has not announced an unfreeze date earlier than the legislated April 2028.

The personal allowance interacts with the marriage allowance and the blind person's allowance

The personal allowance can be reduced by transferring £1,260 to a spouse or civil partner under the marriage allowance, provided the transferor's income is below the personal allowance and the recipient is a basic-rate taxpayer. The marriage allowance is administered by HMRC under sections 55A to 55E of the Income Tax Act 2007. The transfer must be claimed; it is not automatic. Backdating is permitted for up to four tax years, generating a refund where the conditions were met but the claim was not made. The blind person's allowance of £3,070 for 2025/26 is added to the personal allowance for taxpayers registered blind or severely sight-impaired.

The marriage allowance has been a stable feature since 2015. HMRC does not match-make eligible couples; the claim must originate from the lower-earning partner. ONS data on household composition suggests a substantial population of eligible couples remain unclaimed, an issue raised in evidence to the Public Accounts Committee.

The freeze interacts with rising nominal wages to expand the higher-rate population

ONS Annual Survey of Hours and Earnings (ASHE) data shows nominal full-time median earnings have risen materially since 2021, accelerating the fiscal drag effect of the personal allowance and threshold freeze. The mechanism is mechanical: a frozen allowance means a larger nominal income falls outside the allowance, taxed at the basic rate. A frozen higher rate threshold means a larger nominal income falls into the higher rate band. The OBR Spring Statement and Autumn Statement forecasts have repeatedly identified the freeze as the dominant fiscal drag mechanism in the current forecast horizon.

The interaction with the £100,000 taper is particularly punitive. A taxpayer whose income rises from £99,000 to £101,000 receives only £400 net of the £2,000 pay rise, because the marginal rate at that income point is 60% (40% income tax plus 20% from the lost personal allowance at the 40% rate). The OBR has flagged this as an area where fiscal drag interacts with structural tax cliffs.

HMRC administers the personal allowance through PAYE codes and self-assessment

HMRC administers the personal allowance through PAYE tax codes for employees and pension recipients, and through self-assessment for the self-employed and those with additional income sources. The default code is 1257L, signalling a £12,570 allowance. Variations arise where the individual has multiple jobs (the allowance is typically applied to the main job, with the second job on a BR code), where benefits in kind reduce the available allowance, or where the £100,000 taper applies. HMRC issues coding notices each tax year and adjusts in-year codes where circumstances change.

Self-assessment taxpayers reconcile the allowance through the annual return, which calculates the final liability based on actual income. The PAYE system is a withholding mechanism; the self-assessment return is the legal mechanism for finalising the liability. Where PAYE withholding is too low or too high, the reconciliation produces an additional payment or refund.

What is the personal tax allowance UK 2025/26?

The personal allowance for the 2025/26 tax year is £12,570, the same figure as in 2024/25 because of the freeze legislated by Finance Act 2022. The allowance applies uniformly across the UK, including Scotland.

Will the tax allowance 2025 increase?

No. The personal allowance is frozen at £12,570 through to the end of the 2027/28 tax year under Finance Act 2022. Without further primary legislation, the next uprating opportunity is the 2028/29 tax year.

What is the personal allowance increase planned for the next decade?

Under current legislation, no increase is scheduled before April 2028. The freeze was extended by the November 2022 Autumn Statement to cover the 2026/27 and 2027/28 tax years on top of the original 2022/23 to 2025/26 freeze period.

At what income does the HMRC tax-free personal allowance reduction begin?

The personal allowance tapers at £100,000 of adjusted net income, losing £1 for every £2 of income above the threshold. The allowance reaches zero at £125,140 per section 35 of the Income Tax Act 2007. The taper creates an effective 60% marginal rate in the £100,000 to £125,140 band.

Should the government raise income tax personal allowance levels?

The personal allowance level is a matter for primary legislation. HMRC administers the allowance as legislated; the level itself is a Treasury policy decision communicated through Finance Acts. Any increase would require a Treasury announcement and Finance Bill legislation.

Can the personal allowance be transferred between spouses?

Yes, through the marriage allowance. A lower-earning spouse or civil partner whose income is below the personal allowance can transfer £1,260 of allowance to a basic-rate taxpayer partner under sections 55A to 55E of the Income Tax Act 2007. The claim is made through HMRC and can be backdated up to four tax years.

How we verified this

This article draws on the following primary UK sources:

• HMRC Personal Allowance guidance (PA1 series)
• Finance Act 2022 (legislation.gov.uk) for the freeze legislation
• Income Tax Act 2007 (legislation.gov.uk) for the taper at section 35 and marriage allowance at sections 55A-E
• OBR Economic and Fiscal Outlook and policy costings
• HMRC Income Tax statistics
• gov.uk Income Tax rates and allowances
• ONS Annual Survey of Hours and Earnings (ASHE)

No secondary aggregators, no press releases from commercial providers, and no statistics without a named government or regulatory source were used.