What is a Personal Allowance?
The Personal Allowance is an amount set by the Government that you can earn before paying any tax. The Personal Allowance in the UK is currently (2018/2019) £11,850. The amount changes each tax year, so will change again on 6 April 2019.
Your Personal Allowance may be bigger if you claim Marriage Allowance or Blind Person’s Allowance. You should also watch out if your income is over £100,000 as your Personal Allowance will be reduced.
What Happens If You Earn More Than £100,000
Your Personal Allowance is reduced by £1 for every £2 of your income over £100,000. Therefore if you earn more than £123,000 in the tax year 2018/2019 you will lose all your Personal Allowance.
How do I receive my Personal Allowance?
You automatically receive your personal allowance either by your Employer when they pay your salary or as part of working out you tax under Self Assessment.
What Happens if I Earn More than the Personal Allowance?
You pay income tax on earnings above your Personal Allowance. The amount you pay is worked out according to different bands. These bands for 2017/2018 are as follows:
|Band||Taxable income||Tax rate|
|Personal Allowance||Up to £11,850||0%|
|Basic rate||£11,851 to £46,350||20%|
|Higher rate||£46,351 to £150,000||40%|
|Additional rate||over £150,000||45%|