What is the Personal Allowance Restriction?

The personal allowance restriction affects UK individuals who earn more than £100,000 during one tax year. It means that their personal allowance is restricted, slowly being clawed back until they lose their personal allowance in full.

Friendly Disclaimer: Whilst I am an accountant, I’m not your accountant. The information in this article is legally correct but it is for guidance and information purposes only. Everyone’s situation is different and unique so you’ll need to use your own best judgement when applying the advice that I give to your situation. If you are unsure or have a question be sure to contact a qualified professional because mistakes can result in penalties.

How Much is the Personal Allowance Restriction?

The personal allowance restriction is £1 for every £2 of taxable earnings over £100k. That means once income reaches £125,140 all personal allowance is lost and results in an income tax rate of 60% being applied.

personal allowance restriction
Personal Allowance Restriction

How to Avoid the Personal Allowance Restriction

Claiming for all the income tax allowances and reliefs that an individual is entitled to can help to avoid the personal allowance restriction for example by maximising tax-free contributions into a private personal pension or using the dividend allowance.



About Anita Forrest

Anita Forrest is a Chartered Accountant, spreadsheet geek and money nerd helping financial DIY-ers organise their money so they can hit their goals quicker.