A basic personal allowance is the slice of income you can earn each year before income tax applies. In the United Kingdom it is called the Personal Allowance and sits at £12,570 for the 2025/26 tax year.1GOV.UK. Income Tax Rates and Personal Allowances The United States uses a differently named but functionally similar mechanism, the standard deduction, which is $16,100 for a single filer in the 2026 tax year.2Internal Revenue Service. IRS Releases Tax Inflation Adjustments for Tax Year 2026, Including Amendments From the One Big Beautiful Bill Both work the same way: subtract the allowance from your gross income, and tax applies only to what’s left.
How a Personal Allowance Actually Works
Think of the allowance as a zero-rate band at the bottom of the income scale. Whether it’s applied by your employer, your pension provider, or on the tax return itself, the mechanics are the same. Earn less than the allowance and you owe no income tax. Earn more, and only the excess is taxed at whatever rates apply to your bracket.
The allowance covers most kinds of income: wages, pensions, savings interest, rental income, self-employment profits. This is not a tax credit. A credit reduces your final bill pound-for-pound or dollar-for-dollar; an allowance reduces the income the tax is calculated on. For a UK basic-rate taxpayer paying 20%, the £12,570 allowance is worth £2,514 a year in tax saved.
The UK Personal Allowance
The Current Figure and the Freeze
The £12,570 allowance has been fixed at that level since April 2021, and the government has legislated to keep it frozen through at least April 2028, overriding the normal rule that it rises with inflation.3GOV.UK. Income Tax Personal Allowance and the Basic Rate Limit From 6 April 2026 to 5 April 2028 As wages drift up with inflation and the allowance stays flat, more of your earnings crosses into taxable bands each year.
Who Gets It
UK tax residents receive the Personal Allowance automatically. If you live abroad, you still qualify if you’re a British citizen, a citizen of a European Economic Area country, or you worked for the UK government at any point during the tax year.4GOV.UK. Tax on Your UK Income if You Live Abroad – Personal Allowance Some non-residents outside those groups qualify through a double-taxation agreement that specifically includes the allowance.
The allowance is personal, not household. Each spouse or civil partner has their own £12,570, and unused portions don’t automatically transfer.
The £100,000 Taper
Once your adjusted net income passes £100,000, the allowance starts to shrink. You lose £1 of it for every £2 earned above the threshold.5Legislation.gov.uk. Income Tax Act 2007 – Section 35 By £125,140 the allowance is gone and your whole income is taxable.
The side effect is a marginal rate of roughly 60% on income between £100,000 and £125,140. You pay the 40% higher rate on that money and simultaneously lose £1 of tax-free income for every £2 earned, worth another 20%. It catches a lot of higher earners by surprise.
Adjusted net income is your taxable income before the Personal Allowance, minus certain deductions, notably pension contributions paid gross and Gift Aid donations.6GOV.UK. Personal Allowances – Adjusted Net Income A pension contribution that pulls your adjusted net income back below £100,000 effectively earns tax relief at 60%, which makes the arithmetic on pension top-ups in that band unusually generous.
Marriage Allowance
If one partner earns less than £12,570 and the other is a basic-rate taxpayer earning between £12,571 and £50,270 in England, Wales, or Northern Ireland, the lower earner can transfer £1,260 of their allowance (10% of the total) to their spouse or civil partner. That cuts the receiving partner’s tax by up to £252 a year. It doesn’t happen automatically; you apply through HMRC. The transfer stops working if the higher earner pays tax above the basic rate.
How the Allowance Reaches Your Payslip
If you’re employed, PAYE applies the allowance through your tax code. The standard code is 1257L, which tells payroll you’re entitled to the full £12,570.7GOV.UK. Understanding Your Employees Tax Codes – What the Numbers Mean The system spreads the allowance evenly across pay periods, so a monthly-paid worker gets roughly £1,047 tax-free each month before the applicable rate kicks in.
Self-employed people claim the allowance on their Self Assessment return. Your software or accountant subtracts £12,570 from your total profit, and tax is calculated on the balance.
Scotland uses the same £12,570 allowance but applies its own rate bands above that threshold.8GOV.UK. Rates and Thresholds for Employers 2025 to 2026
The US Standard Deduction
The American equivalent is the standard deduction, defined in Section 63 of the Internal Revenue Code.9Office of the Law Revision Counsel. 26 USC 63 – Taxable Income Defined Instead of one flat figure for everyone, it varies by filing status.
2026 Amounts by Filing Status
For the 2026 tax year the standard deduction is $16,100 for a single filer or married person filing separately, $32,200 for a married couple filing jointly or a qualifying surviving spouse, and $24,150 for a head of household.2Internal Revenue Service. IRS Releases Tax Inflation Adjustments for Tax Year 2026, Including Amendments From the One Big Beautiful Bill The joint amount is exactly twice the single amount, so married couples filing jointly aren’t penalized on this line.
These figures adjust for inflation each year. Employers withhold tax based on the information you give on Form W-4, but you formally claim the standard deduction on your 1040.
Extra Deduction for Age 65+ or Blind
Filers who are 65 or older or legally blind receive an additional amount on top of the base. For 2026 that’s an extra $2,050 for single filers 65 and over and an extra $1,650 for each married filer 65 and over. Someone who is both 65 and blind gets the additional amount twice. These figures also index to inflation.
The One Big Beautiful Bill Act added a separate deduction for seniors of up to $6,000 per qualifying taxpayer, available whether or not you itemize. It phases out above $75,000 of income for single filers and $150,000 for joint filers.
If You’re Claimed as a Dependent
If someone else claims you on their return, your standard deduction is capped. You can take either $1,350 or your earned income plus $450, whichever is larger, up to the regular standard deduction for your filing status.9Office of the Law Revision Counsel. 26 USC 63 – Taxable Income Defined A teenager with $800 from a summer job gets the $1,350 floor. A dependent with $10,000 of earned income gets $10,450.
What Happened to Personal Exemptions
Before 2018, US taxpayers claimed a per-person personal exemption on top of the standard deduction. The Tax Cuts and Jobs Act eliminated exemptions and roughly doubled the standard deduction. That change was scheduled to expire after 2025, which would have shrunk the standard deduction back toward $8,350 for single filers and restored personal exemptions at around $5,300 each. The One Big Beautiful Bill Act made the higher standard deduction and the removal of personal exemptions permanent.2Internal Revenue Service. IRS Releases Tax Inflation Adjustments for Tax Year 2026, Including Amendments From the One Big Beautiful Bill The deduction will keep rising with inflation, and exemptions are not coming back.
A Note on State Income Tax
The federal standard deduction does not automatically reduce your state taxable income. Most US states with an income tax offer their own standard deduction or personal exemption, but the amounts vary widely. Some states conform to the federal figure and move with it. Others set their own, often lower amounts. A few provide baseline relief through tax credits instead of deductions. If you live in a state with an income tax, check your state’s filing instructions separately.