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Your Personal Allowance is the amount of money you can earn in a year before HMRC starts biting into it through the Income Tax system. It’s a really important piece of information, and it can change over time so it’s worth keeping an eye on it. Once your income goes over your Personal Allowance, you’ll start paying tax on everything above the threshold at the basic Income Tax rate of 20%.
You can find your Personal Allowance listed in your tax code. Your code will start with a string of numbers, followed by one or more letters. For example, the most common tax code for the 2022/23 tax year is 1257L. To work out the Personal Allowance you qualify for, you multiply the number at the start of your code by 10. Using the example of 1257L, this means that most UK taxpayers in 2022/23 can earn £12,570 before the taxman takes a penny of it.
With a Personal Allowance for 2022/23 of £12,570, any income up to that threshold is tax-free. After that, the tax you pay will depend on the tax bands your income falls into. Here are the Income Tax rates for 2022/23:
| Band | Taxable Income | Tax Rate |
| Personal Allowance | Up to £12,570 | 0% |
| Basic Rate | £12,571 to £50,270 | 20% |
| Higher Rate | £50,271 to £150,000 | 40% |
| Additional Rate | Over £150,000 | 45% |
Here's what it means in practice:
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The Personal Allowance for the 2021/22 tax year was £12,500. From the start of the 2022/23 tax year, the threshold was raised by £70 to £12,570. In real terms, this simply meant that most people could earn an extra £70 per year tax-free. To look at it another way, it put an extra £14 in people’s pockets a year.
There are quite a few reasons why you might be paying too much tax. Here are some of the main examples:
Talk to RIFT if you think you might be owed some tax back. We’re the UK leading experts in tax refunds, and we take all the stress, effort and guesswork out of claiming back what you’re owed.
Do I need to claim my personal allowance?
No, your Personal Allowance is automatically handled through the PAYE system (or through Self Assessment if you’re self-employed). If there’s a problem with your Personal Allowance, though, you might need to talk to HMRC or a tax specialist to get it fixed.
I'm self-employed with income below the Personal Allowance. Do I need to tell HMRC about my earnings?
Probably, but not always. If you’re earning under £1,000 a year from self-employment, for example, you don’t need to report your income to HMRC. However, if you’re earning over that you’ll need to file a yearly Self Assessment tax return – even if you don’t owe any tax!
I have more than one PAYE job. Do I still get a Personal Allowance?
Yes, but your Personal Allowance will usually only be applied to one of your jobs. Your second job will be taxed from the first penny you earn. If one of your jobs pays less than your Personal Allowance threshold, attaching your Personal Allowance to it means you won’t get the full benefit of it. If neither of your jobs pays more than your Personal Allowance, you may be able to get the allowance divided between them.
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