Find out how much the UK personal allowance is for 2023-24, how to claim it depending on whether you are employed or self-employed and what happens once you exceed it.
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.
What is the Personal Tax Allowance for 2023-24?
The UK personal allowance entitles UK individuals to earn an amount tax-free every tax year. For 2023-24, it is £12,570 and has been fixed since 2021-22. You may be entitled to more tax-free earnings if you are eligible to claim:
- Marriage Allowance where you can transfer unused personal allowance to your partner
- Blind Persons Allowance
The personal allowance is clawed back for anyone that earns over £100,000 (this is known as the personal allowance restriction). It is restricted by £1 for every £2 of your income over £100,000 – the clawback of personal allowance results in a 60% tax rate. That means once earnings reach £125,140, all personal allowance is lost and you’ll need to complete a self-assessment tax return as a £100k+ earner.
How to Claim the UK Personal Allowance
The way that you claim the personal allowance depends on how you earn as your income.
If you are employed by someone who issues you with a payslip, your employer should give you your personal allowance entitlement every time they pay you. For the tax year 2023-24 the most common tax code is 1257L (previously 1250L). This equates to receiving 1/12th of the personal allowance each time you are paid; that’s £1,047.50 per month (£12,570 ÷ 12). If your tax code doesn’t use 1257L, then HMRC makes adjustments for the amount of free pay you are entitled to. Want to know more? Read this guide about understanding tax codes to help you understand.
If you are self-employed, you’ll receive your tax-free allowance when you fill in your tax return online. It is automatically applied when HMRC calculate how much tax you owe so you don’t need to do anything to claim it.
If you are employed and self-employed, you should check your payslip to find out whether your employer is giving you your tax-free pay or whether you should claim in on your tax return. This is to ensure you aren’t missing out, or worse, claiming it twice, which will mean you owe money back to HMRC.
Do I Need to Tell HMRC About Earnings Below the Personal Allowance Threshold?
In most cases, you need to tell HMRC about your earnings below the personal allowance threshold. This applies even if you have no tax to pay.
If you have decided to work for yourself or earn money from odd jobs like babysitting or gardening, then you don’t need to tell HMRC if you get paid an income (not profit) of less than £1,000 during one tax year. This is known as the HMRC Trading Allowance and it means you can avoid registering as self-employed.
What Happens Once Your Income Exceeds the Personal Allowance
Once your taxable income exceeds the personal allowance, you’ll begin to pay income tax. There are three different tax brackets – the basic rate of tax, higher rate and additional rate. The rate you’ll pay depends on which tax band your income falls into, but you may pay more than one rate if your salary falls into a different band:
You may pay different tax rates depending on your total taxable income. You could pay tax at the basic rate, higher rate and additional rate tax brackets, depending on your total earnings for the tax year.