For the 2024/25 tax year (6 April 2024 to 5 April 2025), the main UK tax allowances are the £12,570 Personal Allowance for income tax, a £500 Dividend Allowance, a Personal Savings Allowance of £1,000 or £500 depending on your tax band, a £3,000 Capital Gains Tax annual exempt amount, a £60,000 pension annual allowance, and separate £1,000 allowances for trading and property income.1HM Revenue & Customs. Income Tax Rates and Allowances for Current and Previous Tax Years Several of these have been cut sharply from earlier years, and the Personal Allowance itself is frozen at £12,570 until at least April 2028, with legislation extending the freeze through April 2031.2GOV.UK. Income Tax Maintaining the Personal Allowance and the Basic Rate Limit As wages rise while thresholds stand still, more of your income is quietly drawn into tax each year.
The Personal Allowance
The £12,570 Personal Allowance is the amount of income you can earn each tax year before paying any income tax. It applies across the UK, including Scotland, even though Scotland sets its own rates on income above the allowance.3GOV.UK. Income Tax Rates and Personal Allowances Earn less than £12,570 and you owe no income tax at all; earn more and only the excess is taxed.
If you’re employed, PAYE handles the allowance for you. The standard 2024/25 tax code is 1257L, which tells payroll to spread the £12,570 evenly across your pay periods. If you’re self-employed or have income from multiple sources, the allowance is applied when you file Self Assessment. Either way, it reduces the income on which tax is calculated, not the tax bill directly.
Income Tax Bands Above the Allowance
Once you cross £12,570, the rate depends on the band. For England, Wales, and Northern Ireland in 2024/25:1HM Revenue & Customs. Income Tax Rates and Allowances for Current and Previous Tax Years
- Basic rate of 20% on £12,571 to £50,270
- Higher rate of 40% on £50,271 to £125,140
- Additional rate of 45% above £125,140
Scotland uses a different structure with six rates from 19% to 48%, though the Personal Allowance underneath is still £12,570.3GOV.UK. Income Tax Rates and Personal Allowances The Scottish band you fall into also affects entitlement to certain reliefs, such as Marriage Allowance, so it’s worth checking separately.
The £100,000 Taper
You only receive the full £12,570 if your adjusted net income is £100,000 or less. For every £2 above £100,000, you lose £1 of Personal Allowance.3GOV.UK. Income Tax Rates and Personal Allowances By £125,140 the allowance is gone entirely. In that £100,000 to £125,140 window, the effective marginal rate on each extra pound of income reaches 60%, because the shrinking allowance stacks on top of the 40% higher rate.
Someone earning £110,000 loses half the allowance (£5,000), leaving £7,570. Bonuses, taxable benefits like a company car or private medical insurance, and investment income all count toward the £100,000 figure, so the threshold is easier to cross than a salary alone suggests.
Restoring the Allowance
Two tools reduce adjusted net income: personal pension contributions and Gift Aid donations. A pension contribution is deducted when working out adjusted net income, so a well-timed payment can bring you back under £100,000. Gift Aid works similarly, with £1.25 deducted for every £1 donated because the charity reclaims 25p of basic-rate tax. A £4,000 Gift Aid donation reduces adjusted net income by £5,000. Given the 60% marginal rate in this band, the relief on pension contributions here is unusually valuable.
Marriage Allowance and Blind Person’s Allowance
Two allowances raise the tax-free floor for specific people.
Marriage Allowance
If you’re married or in a civil partnership and one of you earns less than £12,570, the lower earner can transfer £1,260 of unused Personal Allowance to the other. The recipient must be a basic-rate taxpayer, or in Scotland pay the starter, basic, or intermediate rate. The transfer cuts the recipient’s tax bill by up to £252 for the year.4GOV.UK. Marriage Allowance
Claims can be backdated to the 2021/22 tax year.4GOV.UK. Marriage Allowance If you were eligible in earlier years but never applied, backdating can recover up to four years of savings in one payment. Once made, the transfer continues automatically for future years unless your circumstances change.
Blind Person’s Allowance
Anyone registered as blind or severely sight-impaired gets an extra £3,070 for 2024/25, taking the tax-free total to £15,640.5GOV.UK. Blind Person’s Allowance – What You’ll Get If the claimant doesn’t earn enough to use it all, the unused portion can be transferred to a spouse or civil partner.
Savings and Dividend Allowances
Investment income has its own tax-free thresholds sitting on top of the Personal Allowance.
Personal Savings Allowance
The Personal Savings Allowance covers interest from bank accounts, building society accounts, and certain bonds. For 2024/25:6GOV.UK. Tax on Savings Interest
- Basic-rate taxpayers get £1,000 of interest tax-free
- Higher-rate taxpayers get £500
- Additional-rate taxpayers get nothing
With savings rates higher than they’ve been in years, it’s easy to drift over the threshold across several accounts without noticing.
Starting Rate for Savings
A separate 0% band can apply to up to £5,000 of savings income if your non-savings income (wages, pensions and similar) is below £17,570.6GOV.UK. Tax on Savings Interest Every £1 of non-savings income above the £12,570 Personal Allowance reduces the £5,000 band by £1. It’s most useful for retirees living mainly on savings interest, or part-time workers with small salaries.
Dividend Allowance
The tax-free Dividend Allowance is £500 for 2024/25.7GOV.UK. Tax on Dividends That’s down from £2,000 until April 2023 and £1,000 in 2023/24. Dividends above £500 are taxed at 8.75% for basic-rate taxpayers, 33.75% for higher-rate, and 39.35% for additional-rate. Shareholders in owner-managed companies who used the larger allowance to take low-tax dividends will feel the change most.
Capital Gains Tax Annual Exempt Amount
When you sell an asset for a profit, whether shares, a second property, or valuable personal possessions, you can realise up to £3,000 of gain in 2024/25 free of Capital Gains Tax.8GOV.UK. Capital Gains Tax Rates and Allowances This has been cut hard: £12,300 in 2022/23, £6,000 in 2023/24, and £3,000 now. Spreading disposals across tax years to use each year’s exempt amount is one of the simplest ways to keep a Capital Gains bill down.
Trading, Property, and Rent-a-Room
Trading Allowance
You can receive up to £1,000 of gross income per year from side activities like online selling, freelance work, or casual services without reporting it or paying tax on it.9GOV.UK. Tax-Free Allowances on Property and Trading Income It’s a single combined limit across all your side activities, not £1,000 per one. Once you cross it, you choose between claiming the flat £1,000 or deducting your actual expenses, whichever helps more.
Property Allowance
A separate £1,000 allowance applies to income from land or property, covering things like renting out a parking space or storage area. If you have both trading and property income, you get both allowances independently, for a combined £2,000 of tax-free gross receipts.9GOV.UK. Tax-Free Allowances on Property and Trading Income You can’t claim the allowance and also deduct expenses against the same income.
Rent-a-Room Relief
Letting out a furnished room in your own home qualifies for Rent-a-Room Relief of up to £7,500 per year tax-free.10GOV.UK. Rent a Room in Your Home – The Rent a Room Scheme The limit halves to £3,750 if someone else, such as a joint owner, also receives income from the same property. Gross receipts under the limit are automatically exempt with no need to report them. The accommodation must be furnished and in your main home; separate investment properties aren’t covered.
Pension Annual Allowance
The annual allowance for tax-relievable pension contributions is £60,000 for 2024/25.11GOV.UK. Tax on Your Private Pension Contributions – Annual Allowance You get income tax relief on contributions up to the limit, or up to 100% of your earnings if lower. Contributions above £60,000 trigger a charge that claws the relief back. Unused allowance from the previous three tax years can be carried forward, which helps people with fluctuating income or large bonuses.
Anyone with adjusted income above £260,000 faces a tapered annual allowance that can fall as low as £10,000. At the other end, non-earners can still contribute up to £3,600 per year including tax relief.
High Income Child Benefit Charge
From 2024/25, the income threshold at which you start losing Child Benefit rose to £60,000, up from £50,000. If either parent earns over £60,000, 1% of the family’s Child Benefit is repaid for every £200 of income above the threshold. At £80,000 or above, the entire benefit is effectively reclaimed through tax.12GOV.UK. High Income Child Benefit Charge Overview
The charge is based on individual income, not household income, so it applies to whichever parent earns more. The same tools that reduce adjusted net income for the Personal Allowance taper (pension contributions and Gift Aid) work here too, and families in the £60,000 to £80,000 band should weigh this against their pension planning.