What is the Personal Allowance?

Definition of the Personal Allowance

The Personal Allowance is the amount of income each individual is entitled to receive free of tax each year.

The basic Personal Allowance for the tax year 2017/18 is £11,500.

For everyone whose income is over £100,000, the Personal Allowance is reduced by £1 for every £2 received over the £100,000 level. An individual whose income is over £122,000 won't receive any income tax-free; their Personal Allowance will have been reduced to £0.

Download your free guide to find out how Making Tax Digital will affect you!

The Personal Allowance figures change every tax year.

Applying the Personal Allowance

Depending on what income you receive, your Personal Allowance is applied in different ways.

If you're self-employed and have no other income, you'll take your Personal Allowance off your profit before working out how much Income Tax to pay.

If you're a salaried employee, your employer will apply your Personal Allowance to your wages when they are working out how much income tax to deduct from your wages, usually with the help of payroll software. They do this by way of your tax code.

The current Personal Allowance

Find out what the current Personal Allowance is for you on FreeAgent's UK tax rates tracker.

Got questions? Ask Emily!

FreeAgent's Chief Accountant Emily Coltman is available to answer your questions in the comments.

Bookkeeping and tax tips

We are committed to keeping your information safe. Read our privacy policy to find out more.