What is the Personal Allowance?
- Personal Allowance
- The Personal Allowance is the amount of tax-free income you are allowed to receive each year. The allowance is reviewed every tax year, but for 2017/18 the basic Personal Allowance is £11,500.
Individuals can earn up to their Personal Allowance (currently £11,500) each year without paying tax. Once you have earned your Personal Allowance, you pay income tax to HMRC on any additional income earned during that tax year.
The income limit for the Personal Allowance is £100,000, which means you are entitled to the full Personal Allowance until you earn £100,000. Beyond that, the allowance reduces by £1 for every £2 you earn. At £123,000, your Personal Allowance is reduced to zero.
The Personal Allowance changes every year and is applied in different ways, depending on your circumstances.
If you are self-employed with no other income, your Personal Allowance is deducted from the profit you declare on the self-assessment tax return you file with HMRC. You pay income tax on the figure that is left over.
If you are employed, your employer will consider your Personal Allowance when working out how much income tax they need to deduct from your wage. Your Personal Allowance is shown in your tax code, which is worked out by HMRC.
Need to know more?
If you are still unsure about your Personal Allowance, the bookkeepers here at Numberworx will be happy to help. Leave your query and one of us will get back to you asap.