Every person in the UK who earns money needs to understand one number more than any other: £12,570. That is your Personal Allowance - the amount of income you can receive each year before you pay a single penny of income tax.
Most people know the number exists. Far fewer understand how it actually works, where it comes from, why it has stayed frozen for years, or - most importantly - how earning more money can quietly make it disappear. This guide covers all of it, step by step, in plain language.
What Is the £12,570 Personal Allowance?
The Personal Allowance is a tax-free slice of your yearly income. You do not pay income tax on this portion - it sits at the bottom of your earnings, shielded from HMRC entirely.
For the 2026/27 tax year (6 April 2026 to 5 April 2027), the standard Personal Allowance is £12,570. Most UK residents get it, whatever kind of taxable income they have.
You could earn it through a job, a pension, self-employment, or a combination of all three - the allowance still protects the first £12,570.
Here is how it plays out in practice. If you earn £20,000 a year, HMRC does not tax you on all of it. Your first £12,570 is completely tax-free. Only the remaining £7,430 gets taxed.
All the Sources of Income It Covers
The Personal Allowance covers your total taxable income from all sources combined - not just wages.
- Salary and wages from employment
- Self-employment profits
- State Pension payments
- Workplace or private pension income
- Rental profit from property
- Interest earned on savings
- Taxable benefits such as company cars or private medical insurance
All of these get added together first. The Personal Allowance is then set against that combined total.
The Tax Bands Above the Allowance - How the Staircase Works
Once your income rises above £12,570, income tax kicks in - but not at a flat rate on everything you earn.
| Income Level | Tax Rate |
|---|---|
| Up to £12,570 | 0% - Personal Allowance |
| £12,571 to £50,270 | 20% - Basic Rate |
| £50,271 to £125,140 | 40% - Higher Rate |
| Over £125,140 | 45% - Additional Rate |
Note: Scotland uses different tax bands above the Personal Allowance.
Why the Allowance Has Been Frozen - And What That Costs You
The £12,570 Personal Allowance has remained unchanged since the 2021/22 tax year.
The freeze was originally due to end in April 2026, but it has been extended: the government has said the Personal Allowance and the higher-rate threshold will stay frozen until April 2031. This creates a phenomenon known as fiscal drag.
As wages rise but tax thresholds remain fixed, more income becomes taxable even though tax rates themselves have not changed.
The Tax Code on Your Payslip - What 1257L Actually Means
The most common PAYE tax code is 1257L.
- 1257 represents the £12,570 Personal Allowance.
- L indicates entitlement to the standard allowance.
Other common codes include:
- BR - Basic Rate tax on all income from that source.
- K - HMRC has added taxable amounts to your code.
When You Start Losing the Allowance: The £100,000 Threshold
Once your income exceeds £100,000, your Personal Allowance starts to reduce.
For every £2 earned above £100,000, you lose £1 of Personal Allowance.
- Income £102,000 → Allowance £11,570
- Income £112,000 → Allowance £6,570
- Income £125,140 → Allowance £0
The Hidden 60% Tax Rate Nobody Warned You About
Between £100,000 and £125,140, many people face an effective marginal tax rate of around 60%.
This happens because:
- You pay 40% higher-rate tax on extra income.
- You simultaneously lose part of your Personal Allowance.
- The lost allowance becomes taxable at 40% as well.
When National Insurance is included, the effective rate can reach approximately 62%.
What Counts As Income - And What You Can Deduct
Income Included
- Employment income
- Self-employment profits
- Rental income
- Savings and investment income
- Dividends
- Pension income
- Certain trust and state benefit income
Deductions Allowed
- Pension contributions
- Gift Aid donations
- Trading losses
These deductions reduce your adjusted net income and may help preserve your Personal Allowance.
Smart, Legal Ways to Keep Your Full Allowance
- Increase pension contributions.
- Make Gift Aid donations.
- Use salary sacrifice schemes.
- Share income efficiently within a household where appropriate.
The Marriage Allowance - A Free Tax Saving Many Couples Miss
The Marriage Allowance allows a lower-earning spouse or civil partner to transfer £1,260 of unused Personal Allowance.
This can reduce the other partner's tax bill by up to £252 per year.
When Someone Might Not Receive the Full Allowance
- Some non-residents may not qualify automatically.
- People using the Foreign Income and Gains regime may lose entitlement.
- Registered blind people (or those severely sight impaired) can claim Blind Person's Allowance on top – £3,250 in 2026/27.
Conclusion - Know Your Number, Know Your Rights
The £12,570 Personal Allowance is the foundation of the UK income tax system.
Understanding how it works can help you:
- Pay the correct amount of tax.
- Avoid unexpected tax bills.
- Reduce taxable income legally.
- Protect your Personal Allowance if you earn over £100,000.
The key points are simple: everyone gets a tax-free slice of income, frozen thresholds create fiscal drag, and higher earners can lose their allowance through the £100,000 taper.
Frequently Asked Questions
Does my Personal Allowance reset each tax year?
Yes. A new allowance applies every tax year from 6 April to 5 April.
I have two jobs. Do I get the allowance on both?
No. You receive one Personal Allowance in total, usually allocated to your main job.
Can I lose the allowance if I earn just slightly over £100,000?
Yes. The taper starts immediately once adjusted net income exceeds £100,000.
Is the allowance the same in Scotland?
Yes. The Personal Allowance is £12,570 across the UK, although Scotland has different tax bands above it.
What is fiscal drag?
Fiscal drag occurs when tax thresholds remain frozen while wages increase, causing more income to become taxable.
Is the State Pension included in my total income?
Yes. The State Pension counts as taxable income and forms part of your total income calculation.