Income tax brackets and personal allowance
Do you know what tax bracket you’re in or how much you’re allowed to earn before you get taxed? Find out about personal allowance limits, and how income tax and National Insurance determine the amount of money you actually get when you’re paid.
Do you know what tax bracket you’re in or how much you’re allowed to earn before you get taxed? Find out about personal allowance limits, and how income tax and National Insurance determine the amount of money you actually get when you’re paid.
What is the personal tax allowance?
The personal tax allowance is the amount of money you can earn each tax year before you start paying income tax.
Everyone has a personal allowance, but it’s applied in different ways.
If you’re an employee, your employer will automatically deduct your personal allowance from your salary through its payroll system to work out your taxable income.
If you’re self-employed, your personal allowance will be deducted from your profit through your self-assessment tax return to work out how much income tax you’ll need to pay.
If you’re retired, you’ll have to pay tax on any income you earn over your personal allowance, such as from pensions, investments and property.
What is my personal allowance for the 2024/25 tax year?
The standard personal tax allowance that applies from 6 April 2024 to 5 April 2025 is £12,570. This means that you don’t get taxed on the first £12,570 you earn – although there are some exceptions:
- If your income is over £100,000, you gradually lose your tax-free personal allowance.
- Once you start earning over £125,140 a year, you don’t have a personal allowance at all.
- The blind person’s allowance is £3,070 added to your yearly personal allowance.
- Marriage allowance lets you transfer £1,260 of your personal allowance to your husband, wife or civil partner.
Which income tax band am I in?
Working out which income tax band you’re in is quite simple. It’s based on the amount of taxable income you make each tax year.
Tax is mostly charged on wages from employment or profits from running a business. But it also applies to income from savings and investments, and renting out a property.
| Income tax band | Taxable income | Income tax rate |
| Personal allowance | £0 - £12,570 | 0% |
| Basic rate | £12,571 - £50,270 | 20% |
| Higher rate | £50,271 - £125,140 | 40% |
| Additional rate | £125,140+ | 45% |
| Income tax band | Taxable income | Income tax rate |
| Personal allowance | £0 - £12,570 | 0% |
| Starter rate | £12,571 - £14,876 | 19% |
| Basic rate | £14,877 - £26,561 | 20% |
| Intermediate rate | £26,562 - £43,662 | 21% |
| Higher rate | £43,663 - £75,000 | 42% |
| Advance rate | £75,001 - £125,140 | 45% |
| Top rate | £125,140+ | 48% |
Example of how income is taxedAbby earns £15,000 a year. In simple terms, the first £12,570 she makes is covered by her personal allowance, so there’s no tax to pay. However, the remaining £2,430 is taxed at the rate of 20% because it passes the first tax threshold. However, if Abby earns £80,000, the first £12,570 is tax free, the amount between £12,571 and £50,270 is taxed at 20%, and the remaining amount is taxed at the higher rate of 40%. In Scotland, the same earnings would be split among the different rates of taxation. |
What if my income is above £100,000?
If your annual income rises above £100,000, your personal tax allowance (originally £12,570) decreases by £1 for every £2 of taxable income over £100,000 that you’re earning.
This means that once you’re earning £125,140 a year or more, your personal allowance falls to £0.
What is marriage allowance?
Marriage allowance is a way for spouses or civil partners to share a portion of their personal tax allowance. It lets you transfer up to £1,260 of your personal allowance to your partner, reducing the amount of tax they need to pay that year.
To qualify for marriage allowance, you must meet the following criteria:
- You’re married or in a civil partnership.
- One of you doesn’t pay income tax or has an income below the personal allowance limit – less than £12,570 in the 2024/25 tax year.
- The other pays the basic income tax rate. This is 20% and applies to those earning from £12,571 - £50,270. In Scotland, they must pay the starter, basic or intermediate tax rate, which means their income is usually between £12,571 and £43,662.
As an example, if you earn £11,500 a year, which is £1,250 below the personal tax allowance, you don’t pay tax. Your partner is the main earner in the household and earns £20,000 a year. They also have a personal allowance of £12,570, which means as a couple, you have £7,430 in taxable income.
With marriage allowance, you can transfer £1,260 of your personal allowance to your partner. This means that your personal allowance will drop to £11,310. Meanwhile, your partner gets a ‘tax credit’ on £1,260 of their taxable income.
You’ll now pay tax on £190, but your partner will only pay tax on £6,170. As a couple you benefit, as you’re only paying income tax on £6,360 rather than £7,430, which saves you £214 in tax.
What is blind person’s allowance?
Blind person’s allowance is added to your personal allowance. For the 2024/25 tax year, it’s set at £3,070.
To qualify for blind person’s allowance, you must be registered with your local council as blind or severely sight impaired and have documentation from your doctor confirming this.
If you’re in Scotland, you can qualify for blind person’s allowance if you can’t do work for which eyesight is essential, and you have a certificate or document from your doctor saying that you’re blind or severely sight impaired.
As with the marriage allowance, this amount can be transferred to a spouse or civil partner, even if they’re not blind themselves.
As with the Marriage Allowance, this amount can be transferred to a spouse or civil partner, even if they’re not blind themselves.
Is National Insurance separate from income tax?
National Insurance is a separate form of tax that’s paid in addition to income tax. If you’re aged 16 or over and earning more than £242 a week, or making a profit of at least £12,570 a year if you’re self-employed, it’s a legal requirement that you pay it.
There are different types of National Insurance, known as classes, which are numbered 1 to 4. The class you’re in is based on your employment status – whether you’re an employee or self-employed – and the amount you earn.
By paying National Insurance, you qualify for a number of benefits, which could include:
- Basic State Pension
- Additional State Pension
- Contribution-based Jobseekers Allowance
- Contribution-based Employment and Support Allowance
- Maternity Allowance
- Bereavement Support Payment.
A guide to National Insurance classes is shown below:
| National Insurance class | Paid by |
| Class 1 | Employees earning £242+ per week who are under State Pension age. Money is automatically deducted by employers. |
| Class 1A or 1B | Paid directly by employers into their employee’s expenses or benefits. |
| Class 2 | Mandatory Class 2 contributions were scrapped in April 2024, but those earning less than £6,725 a year can still pay them voluntarily to access benefits. |
| Class 3 | Voluntary contributions to fill or avoid gaps in your National Insurance record. |
| Class 4 | The self-employed earning £12,570 or more in profit per year. |
If you’re an employee, you’ll also have a category letter applied to your National Insurance. This tells employers how much National Insurance they need to contribute on your behalf when they run their payroll.
| Category | Definition |
| A | Employees who don’t qualify for the categories below. |
| B | Married women and widows entitled to pay reduced National Insurance. |
| C | Employees over the State Pension age. |
| H | Apprentices under 25. |
| J | Employees who are already paying National Insurance through another job. |
| M | Employees under 21. |
| Z | Employees under 21 who are already paying National Insurance through another job. |
| X | Employees who don’t have to pay National Insurance, for example if they’re under 16. |
The amount of National Insurance to be paid in the 2024/25 tax year is calculated as follows.
If your monthly salary is less than the lower earnings limit of £533, you’ll pay no National Insurance and won’t earn any National Insurance benefit rights.
| Category | Monthly salary | ||
| £533 - £1,048 | £1,048.01 - £4,189 | Over £4,189 | |
| A | 0% | 8% | 2% |
| B | 0% | 1.85% | 2% |
| C | N/A | N/A | N/A |
| H | 0% | 8% | 2% |
| J | 0% | 2% | 2% |
| M | 0% | 8% | 2% |
| Z | 0% | 2% | 2% |
What happens if personal tax thresholds are frozen?
The personal tax allowance has been frozen since 2021-2022 and isn’t due to rise until at least 2028. Previously, the allowance rose in line with inflation.
As wages and inflation rise but the personal allowance doesn’t, the result is ‘fiscal drag’. This means that more people start paying tax or are dragged into higher tax bands.
Although the recent cuts to National Insurance have reduced the tax burden for millions of workers, some people could see their tax bill rise overall because of the freeze to the personal allowance.
This is why it’s important to try to save what you can. It’s worth taking the time to look at how you can maximise the interest rates on a savings account or cash ISA that offers tax-free savings.
Frequently asked questions
What is my personal allowance if I’m self-employed?
You get the same personal allowance as someone being paid through PAYE by an employer – so £12,570 during the 2024/25 tax year. It’s deducted from your tax bill through self-assessment.
You may also be entitled to a ‘trading allowance’, which is a tax-free allowance for the first £1,000 of your income from self-employment.
What is my personal allowance if I’m an employee and self-employed?
If you’re freelancing on the side of a PAYE role or juggling two jobs, one as an employee and one as self-employed, the personal tax allowance is applied to the role that HMRC views as your main job.
To calculate your income tax rate, the taxable income from both roles is combined.
When it comes to National Insurance, you’ll be paying separate amounts for each role.
What is the personal savings allowance?
The personal savings allowance is the total amount of interest you can earn each financial year without paying tax. It’s not the same as the personal tax allowance.
How much tax-free allowance you get depends on your income tax band, but you could earn up to £1,000 a year without paying tax on savings income.
It covers interest from current accounts, savings accounts, trust funds, government or company bonds and some life insurance, among others.
Savings from some National Savings and Investments accounts, as well as those earned with an ISA, don’t count towards your personal savings allowance.
