How Much Can You Earn Before Paying Tax?

Complete guide to UK tax-free allowances for 2025/26. Personal allowance, savings, dividends, trading income and more.

James Mitchell
James Mitchell · Senior Tax Advisor (CTA, ATT) · Reviewed

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Personal Allowance: £12,570

The personal allowance is the amount you can earn each tax year before paying income tax. For 2025/26, it is £12,570. This applies to most people and covers income from employment, self-employment, pensions and rental income.

The personal allowance has been frozen at £12,570 since April 2021 and is expected to remain at this level until at least April 2028. Due to wage inflation, this freeze (often called "fiscal drag") means more people are pulled into higher tax bands each year.

Key point: Everyone gets the same personal allowance regardless of age. The previous higher allowance for people born before 6 April 1948 was abolished in 2016.

All UK Tax-Free Allowances 2025/26

AllowanceAmountWho Gets It
Personal Allowance£12,570Everyone (reduces above £100K)
Marriage Allowance£1,260 transferNon-taxpayer to basic rate spouse
Blind Person's Allowance£3,070Registered blind/severely sight impaired
Trading Allowance£1,000Self-employed/casual income
Property Allowance£1,000Rental income
Savings Allowance (Basic Rate)£1,000Basic rate taxpayers
Savings Allowance (Higher Rate)£500Higher rate taxpayers
Savings Allowance (Additional Rate)£0Additional rate taxpayers
Dividend Allowance£500Everyone
Capital Gains Annual Exempt Amount£3,000Everyone

Personal Allowance Taper: Earning Over £100,000

If your adjusted net income exceeds £100,000, your personal allowance is reduced by £1 for every £2 above this threshold. This means your personal allowance is completely eliminated at £125,140.

The 60% tax trap: Between £100,000 and £125,140, you effectively pay a 60% marginal rate of tax. This is because you lose 20% of the allowance (worth 40% in tax) on top of the 40% higher rate. Pension contributions and Gift Aid donations can reduce your adjusted net income below £100,000 to reclaim your full personal allowance.
Adjusted Net IncomePersonal AllowanceEffective Marginal Rate
Up to £100,000£12,57040%
£105,000£10,07060%
£110,000£7,57060%
£115,000£5,07060%
£120,000£2,57060%
£125,140+£040% (or 45% above £125,140)

Marriage Allowance

Marriage Allowance lets you transfer up to £1,260 of your personal allowance to your spouse or civil partner if you earn less than £12,570 and they are a basic rate taxpayer. This saves the receiving partner up to £252 per year.

You can backdate a Marriage Allowance claim for up to 4 years, meaning you could claim up to £1,260 in total backdated savings. Apply free on GOV.UK - do not use paid agents who charge a fee for this free service.

Savings, Dividends & Capital Gains

Personal Savings Allowance: Basic rate taxpayers can earn £1,000 in savings interest tax-free. Higher rate taxpayers get £500. Additional rate taxpayers get no allowance. ISA interest is always tax-free on top of this.

Dividend Allowance: The first £500 of dividend income is tax-free for 2025/26. Above this, dividends are taxed at 8.75% (basic), 33.75% (higher), or 39.35% (additional rate).

Capital Gains Annual Exempt Amount: You can make £3,000 in capital gains before paying Capital Gains Tax. This was reduced from £6,000 in 2023/24 and £12,300 in 2022/23.

Trading Allowance: If you have self-employed or casual income, the first £1,000 is tax-free under the trading allowance. You do not need to register for Self Assessment if your trading income is under £1,000.

Related Calculators

Tax Calculator | Personal Allowance Calculator | Income Tax Calculator | Salary Calculator | NI Calculator

Frequently Asked Questions

How much can you earn before paying tax in 2025/26?
In the 2025/26 tax year, the personal allowance is £12,570. This means you can earn up to £12,570 from employment or self-employment before paying any income tax. You may also have additional tax-free allowances for savings interest (up to £1,000), dividends (£500), and trading income (£1,000).
What is the personal allowance for 2025/26?
The personal allowance for 2025/26 is £12,570. This has been frozen at this level since 2021/22 and is expected to remain frozen until April 2028. The personal allowance reduces by £1 for every £2 of income above £100,000, reaching zero at £125,140.
Do I pay tax on savings interest?
Basic rate taxpayers get a £1,000 personal savings allowance, meaning the first £1,000 of savings interest is tax-free. Higher rate taxpayers get £500, and additional rate taxpayers get no savings allowance. ISA interest is always tax-free regardless of your tax band.
What happens to my personal allowance if I earn over £100,000?
Your personal allowance is reduced by £1 for every £2 of adjusted net income above £100,000. This means it is completely eliminated once your income reaches £125,140. This creates an effective 60% marginal tax rate on income between £100,000 and £125,140 (40% tax plus 20% from lost allowance).
Is my pension income taxable?
Yes, pension income (State Pension, workplace pension, and private pension) counts as taxable income and uses up your personal allowance. However, the first 25% of a defined contribution pension can usually be taken as a tax-free lump sum.
Can I transfer my personal allowance to my spouse?
If you earn less than £12,570, you can transfer up to £1,260 of your personal allowance to your spouse or civil partner through Marriage Allowance. Your partner must be a basic rate taxpayer. This can save up to £252 per year in 2025/26.
How much can I earn from a side job tax-free?
The trading allowance gives you £1,000 of tax-free income from self-employment or casual work per year. This is separate from your personal allowance. If your side income exceeds £1,000, you can either deduct the £1,000 allowance or claim actual expenses, whichever is more beneficial.
What is the dividend allowance for 2025/26?
The dividend allowance for 2025/26 is £500. The first £500 of dividend income is tax-free regardless of your tax band. Above that, dividends are taxed at 8.75% (basic rate), 33.75% (higher rate), or 39.35% (additional rate). The allowance was reduced from £1,000 in 2023/24.

Official Sources

Data verified against official UK government sources. Last checked April 2026.