UK Personal Allowance: A Brief Guide
Understanding UK personal Allowance seems confusing to you. Learn how it works and affects individuals and businesses.
The UK owns a massive subject on tax rates, so getting to grips with all tax rules and regulations is quite tricky. As a business owner, you have to pay different taxes. With so many variations in taxes, you might feel lost. As a sole trader, limited company, or contractor, every business has its own rules for paying taxes.
Select the links in the table of contents to jump directly to specific article sections.
- What is meant by UK Personal Allowance?
- Details of Personal Allowance and Tax Bands
- Understanding Additional Tax Allowance
- Marriage Allowance
- Dividend Allowance
- Blind Person Allowance
- How can hiring an accountant help with UK personal allowance?
The structure of a business also affects the tax reporting deadlines and requirements. To ease your worry, we have come up with brief details to explain the tax bracket for 2023/2024 and how it will affect you. Here, you will also get an explanation of how to be more tax-efficient.
What is meant by UK Personal Allowance?
The UK personal allowance is the income you earn every tax year before it becomes subject to income tax. In 2024, the tax-free personal Allowance is £12570, which means you are not subjected to paying tax if you earn less than £12570. However, any earnings above this amount will be subjected to income tax.
Whether you are employed, self-employed, or get income from various sources, you can use your allowance once every tax year. Let us describe an example to clarify your confusion about UK personal Allowance.
You might earn employment wages or receive monthly money from your business activities. You may also receive income from a combination of all of these. Your Allowance will be applied to the total amount of money earned, not separately to every source.
Details of Personal Allowance and Tax Brands
Your earnings above the personal Allowance will be subjected to income tax. We have enlisted all the tax bands and rates in the table below. You can check which category you fall in and the percentage of tax levied on your total wage.
| Tax Payers | Taxable Income | Tax Rate |
| Basic Rate | £12571-£50270 | 20% |
| Higher Rate | £50271-£125140 | 40% |
| Additional Rate | £125140 | 45% |
Understanding Additional Tax Allowance
Certain factors can benefit some individuals with a tax-free allowance listed below.
Marriage Allowance
You can benefit from the marriage allowance if you are married in a civil partnership. That means you can get tax relief and reduce your tax bill from £401 to £1037.50 over a year. However, if you get separated through circumstances or divorced, you can still get a marriage couple allowance until the end of the tax year.
However, one partner should earn less than £12570 personal allowance. And the other one should fall in the basic rate category. If you transfer your Allowance to your partner, then there’s a chance you might pay more tax.
Dividend Allowance
According to the 2023/2024 dividend allowance, if you are employed or get income from any other source in the form of a dividend, you will reach your 1st £1000 tax-free. However, in the coming 2024/2025 tax year, the dividend allowance will be further reduced to £500.
Blind Person Allowance
Persons who are registered blind will get an extra tax relief on personal Allowance. In the 2024 tax year, the blind person tax allowance is £2870, added to the personal Allowance. However, in 2024/2025, the blind person allowance will be set to £3070.
How can hiring an accountant help with UK personal allowance?
Personal Allowance is not a big deal for any UK individual. However, working with an accountant might help with your peace of mind. With Lockhart Amin Accountant, you will receive tailored support and optimal advisory to ensure tax efficiency. We make sure that your tax affairs and remuneration strategy are fully efficient.
With us, you don’t have to worry about the updates of the UK tax allowance as we keep a keen eye on every change. For us, calculating your tax relief and tax returns is a breeze. So get in touch now as we prioritise your satisfaction.