What Is the Personal Tax Allowance for 2024/25?

Understanding the UK Personal Tax Allowance

The personal tax allowance is one of the most important parts of the UK tax system, yet many people aren’t fully sure how it works or whether it applies to them.

Simply put, the personal allowance is the amount of income you can earn each tax year before you start paying Income Tax. Anything you earn above this amount is potentially taxable.

In this guide, we explain what the personal tax allowance is for 2024/25, who gets it, when it’s reduced, and common situations where people accidentally lose part (or all) of it.

What Is the Personal Tax Allowance for 2024/25?

For the 2024/25 tax year, the standard UK personal tax allowance is:

£12,570

This means most people can earn up to £12,570 in a tax year before paying Income Tax.

This allowance applies whether you are:

• Employed

• Self-employed

• A company director

• Receiving pension income

Who Gets the Personal Tax Allowance?

Most UK taxpayers are entitled to the personal allowance, including:

• Employees paid through PAYE

• Sole traders

• Company directors

• Pensioners

• Individuals with rental or investment income

However, the allowance is income-dependent, and not everyone keeps the full amount.

When Does the Personal Allowance Reduce?

If your adjusted net income exceeds £100,000, your personal allowance starts to reduce.

For every £2 earned over £100,000, your allowance is reduced by £1.

Once income reaches £125,140, the personal allowance is completely lost.

This creates an effective higher tax rate for people earning between £100,000 and £125,140.

What Counts as Income for the Personal Allowance?

Income that counts towards the £100,000 threshold includes:

• Salary or wages

• Self-employed profits

• Rental income

• Dividend income

• Most taxable benefits

Certain deductions, such as pension contributions and charitable donations, can reduce adjusted net income and help preserve your allowance.

Does the Personal Allowance Apply Automatically?

If you’re employed, your personal allowance is usually applied automatically through your PAYE tax code.

If you are:

• Self-employed

• A company director

• Receiving multiple income streams

You may need to complete a Self Assessment tax return so HMRC can calculate your allowance correctly.

Common Situations That Cause Confusion

Multiple Jobs

If you have more than one job, your allowance is usually applied to only one role.

Company Directors

Directors often receive income through a mix of salary and dividends, which still counts toward the allowance.

High Earners

People earning over £100,000 often lose part of their allowance without realising until their tax bill increases.

How the Personal Allowance Affects Your Tax Bill

Your personal allowance reduces the amount of income that is taxed — not the tax itself.

For example:

• Income: £40,000

• Personal allowance: £12,570

• Taxable income: £27,430

This is why understanding how your allowance works is crucial for tax planning.

How VIP Accounting Ltd Can Help

At VIP Accounting Ltd, we help individuals, business owners, and company directors across Benfleet, Essex and the UK understand how allowances, thresholds, and tax rules affect them.

We can help you:

• Check if you’re entitled to the full personal allowance

• Reduce adjusted net income through tax planning

• File accurate Self Assessment returns

• Avoid unexpected tax bills

• Plan efficiently if your income is approaching £100,000

If you’re unsure how your income affects your tax allowance, our team can guide you.

FAQs

Does everyone get the £12,570 allowance?

Most people do, but it reduces once income exceeds £100,000.

Do dividends use up my personal allowance?

Yes — dividends count as income and use part of your allowance.

Can I increase my personal allowance?

You can’t increase it, but tax planning (such as pension contributions) can help protect it.

Do I need a tax return to claim the allowance?

If you’re self-employed or have multiple income sources, yes.

VIP Accounting Ltd is a strategic accounting and tax advisory firm based in Benfleet, Essex, supporting individuals and businesses across the UK with tax planning, Self Assessment, and full HMRC compliance.