Understanding how much you can earn before paying tax each month is crucial for managing your finances effectively in the UK.
With changing thresholds and allowances each tax year, staying informed can help individuals, employees, and business owners make smarter money decisions.
What Are the Current Personal Allowance and Tax-Free Income Limits in the UK?
In the United Kingdom for the 2025–2026 tax year, the Personal Allowance remains set at £12,570. This allowance represents the portion of your annual income on which you do not have to pay Income Tax.
It applies automatically unless your income surpasses certain thresholds or you are subject to specific tax codes.
If your annual income exceeds £100,000, your Personal Allowance begins to decrease. For every £2 of income above £100,000, £1 of your Personal Allowance is withdrawn.
Therefore, once your income reaches £125,140, you no longer benefit from any tax-free Personal Allowance.
Certain groups are entitled to higher allowances. For example, individuals eligible for the Blind Person’s Allowance receive an additional tax-free amount added to their standard Personal Allowance.
Additionally, under the Marriage Allowance scheme, individuals earning below the Personal Allowance threshold can transfer a portion of their unused allowance to their spouse or civil partner.
A portion of income can also be tax-free when it falls under other exemptions, such as savings interest and dividends, as covered later in this article.
How Do UK Income Tax Rates and Bands Work for 2025–2026?
Once your income exceeds the Personal Allowance, different segments of your taxable income fall into various tax bands, each taxed at a different rate. For the 2025–2026 tax year, the UK income tax rates and bands are structured as follows:
| Income Band | Taxable Income Range | Tax Rate |
| Personal Allowance | Up to £12,570 | 0% |
| Basic Rate | £12,571 to £50,270 | 20% |
| Higher Rate | £50,271 to £125,140 | 40% |
| Additional Rate | Over £125,140 | 45% |
These bands apply in England, Wales, and Northern Ireland. Scotland operates its own system with slightly different rates and thresholds.
Income types subject to these rates include salaries, pensions, rental incomes, and certain benefits. Tax is applied progressively, meaning only the amount within each band is taxed at that band’s rate.
How Much Can You Earn Each Month Before Paying Tax?
To determine how much income you can earn each month before being liable for Income Tax, divide the annual Personal Allowance by 12.
£12,570 ÷ 12 = £1,047.50 per month
If you earn £1,047.50 or less each month, you do not pay Income Tax. However, National Insurance Contributions (NICs) might still apply if your income exceeds the NIC threshold.
Here’s an example of how monthly earnings interact with taxation:
| Monthly Earnings | Tax-Free Amount | Taxable Amount | Applicable Tax Rate |
| £1,000 | £1,000 | £0 | 0% |
| £1,200 | £1,047.50 | £152.50 | 20% |
| £4,000 | £1,047.50 | £2,952.50 | 20% (portion), 40% (portion if cumulative income reaches higher bracket) |
The PAYE system ensures that tax deductions are distributed across monthly pay periods to avoid large tax bills at the year-end.
Employees should regularly check their payslips to verify that the correct tax code is applied, ensuring accurate tax deductions.
What Other Tax-Free Allowances Can You Use in the UK?
In addition to the standard Personal Allowance, several other tax-free allowances are available in the UK. These allowances offer individuals opportunities to reduce the amount of income on which they must pay tax. Utilising these allowances can significantly improve overall tax efficiency.
Savings Interest Allowance
The Personal Savings Allowance allows most individuals to earn a certain amount of interest from their savings without paying tax. The exact amount depends on the individual’s Income Tax band:
- Basic rate taxpayers (20%) can earn up to £1,000 of savings interest tax-free each year.
- Higher rate taxpayers (40%) can earn up to £500 of savings interest tax-free annually.
- Additional rate taxpayers (45%) do not receive a savings allowance.
This means that individuals who save in bank accounts, building societies, or hold bonds can benefit from tax-free returns up to the set thresholds.
Dividend Allowance
For those who hold shares in companies, the Dividend Allowance applies. In the 2025–2026 tax year, individuals can receive up to £500 of dividend income tax-free.
Any dividend income exceeding this threshold is taxed at:
- 8.75% for basic rate taxpayers
- 33.75% for higher rate taxpayers
- 39.35% for additional rate taxpayers
Dividends received within an Individual Savings Account (ISA) remain entirely tax-free and do not count towards the Dividend Allowance.
Trading Allowance
The Trading Allowance provides tax relief for individuals with small amounts of self-employed income. If you earn up to £1,000 from self-employment in a tax year, you do not need to register for Self Assessment or pay tax on that income.
This allowance is particularly useful for those with side incomes, such as freelancers, tutors, or online sellers, who earn modest amounts outside of their primary employment.
If self-employed income exceeds £1,000, you must either deduct the £1,000 allowance from your income or claim allowable business expenses instead, whichever is more beneficial.
Property Income Allowance
Similarly, the Property Income Allowance allows individuals to earn up to £1,000 from renting out property without paying tax. This applies to:
- Renting a single room
- Renting out entire properties on a small scale
- Occasional short-term letting
However, if an individual opts into the Rent a Room Scheme, which offers a higher exemption (£7,500 per year), the Property Income Allowance cannot also be claimed.
It is important to note that if gross property income exceeds £1,000, taxpayers must report it to HMRC, but they can still opt to deduct the allowance instead of actual expenses.
Combining Allowances
In many cases, individuals can benefit from several allowances simultaneously. For example:
- Earning interest from savings within the Personal Savings Allowance
- Receiving dividends within the Dividend Allowance
- Earning self-employed income within the Trading Allowance
- Generating rental income within the Property Income Allowance
By understanding and strategically utilising these allowances, taxpayers can legitimately reduce their overall tax liability and maximise their take-home income.
Here’s a quick overview:
| Allowance Type | Tax-Free Amount | Applies To |
| Savings Interest Allowance | £1,000 (basic rate), £500 (higher rate) | Savings accounts, bonds, ISAs |
| Dividend Allowance | £500 | Dividends from shares |
| Trading Allowance | £1,000 | Self-employed or freelance income |
| Property Income Allowance | £1,000 | Rental income |
It is advisable to keep accurate records of all income streams and consult a financial adviser or tax professional when in doubt, ensuring full compliance with HMRC rules.
These allowances are independent of each other and can be used simultaneously if applicable. For instance, an individual could earn tax-free savings interest, dividends, and self-employment income all in the same tax year.
How Can You Reduce Your Income Tax Payments Legally?
The UK tax system allows for various legal mechanisms to reduce tax liability:
- Marriage Allowance: Where one partner has unused Personal Allowance, it can be transferred to their spouse or civil partner, potentially reducing the couple’s tax bill by up to £252 annually.
- Married Couple’s Allowance: Available for couples where one partner was born before 6 April 1935, offering a reduction in tax owed rather than an increase in the Personal Allowance.
- Pension Contributions: Payments into registered pension schemes are deductible from taxable income, often bringing income into lower tax brackets.
- Charitable Donations: Donations made under Gift Aid increase the value of donations and offer tax relief to higher and additional rate taxpayers.
Strategic financial planning using these allowances and reliefs can lead to substantial savings over the long term.
What Happens to Personal Allowance if You Earn Over £100,000?
The Personal Allowance reduction for high earners is a critical feature of the UK tax system. If your adjusted net income exceeds £100,000, your Personal Allowance diminishes by £1 for every £2 over the limit.
For instance, if your income is £110,000:
- Excess income = £110,000 – £100,000 = £10,000
- Allowance reduction = £10,000 ÷ 2 = £5,000
- Adjusted Personal Allowance = £12,570 – £5,000 = £7,570
This mechanism creates a marginal effective tax rate of 60% for income between £100,000 and £125,140 when both the 40% tax rate and the loss of allowance are considered.
Understanding how this impacts your take-home pay is essential for those nearing or crossing the £100,000 income threshold. Planning pension contributions or charitable giving can sometimes help bring income below the tapering level.
How to Check How Much Tax You’re Paying in the UK?
Keeping track of your tax payments is crucial for ensuring that you are paying the correct amount and avoiding any unexpected liabilities at the end of the tax year. Whether you are employed, self-employed, or receiving a pension, there are clear ways to check your tax status throughout the year.
Reviewing Your Payslip
For employed individuals, the payslip serves as the primary record of how much Income Tax has been deducted each pay period. A standard payslip shows details such as gross pay, Income Tax deducted, National Insurance contributions, pension contributions, and the tax code in use.
Employers are responsible for applying the correct tax code and deducting the correct amount under the Pay As You Earn (PAYE) system. If the tax code is wrong or outdated, it could result in incorrect tax deductions.
Payslips also reveal cumulative totals for the tax year, making it easier to compare the amounts deducted with your overall earnings.
| Payslip Details | What It Shows |
| Gross Pay | Total earnings before deductions |
| Tax Code | Determines how much tax-free income you receive |
| Income Tax Deducted | Amount of tax already paid |
| National Insurance Paid | Contributions towards state benefits |
| Pension Contributions | Deductions towards workplace pensions |
Checking these details monthly ensures that any issues are caught early and can be corrected without delay.
Understanding Your Tax Code
The tax code assigned by HMRC reflects your tax-free income entitlement and any adjustments required for other income or benefits. Each code is a combination of numbers and letters and is used by employers to calculate how much tax to deduct.
For example, the code 1257L in 2025–2026 indicates that the individual is entitled to the full standard Personal Allowance of £12,570. Codes containing letters like “M” or “N” refer to Marriage Allowance transfers, while codes like “BR” or “D0” suggest that all income is taxed at a fixed rate, often used for second jobs or pensions.
Incorrect tax codes are a common reason for overpaying or underpaying tax. If you suspect an error, it is essential to contact HMRC to request a review.
| Tax Code Example | Meaning |
| 1257L | Standard Personal Allowance applied |
| BR | All income taxed at basic rate |
| D0 | All income taxed at higher rate |
| M | Receiving Marriage Allowance from spouse |
| N | Transferring Marriage Allowance to spouse |
Understanding your tax code ensures that you can monitor whether the correct amount of tax is being deducted from your earnings.
Accessing Your HMRC Online Account
Individuals can check their tax records online by setting up a Personal Tax Account with HMRC. Through this service, you can view your tax code, income records, previous tax returns, and how much tax you have paid in the current and previous tax years.
Access to the account requires verifying your identity using documents such as a UK passport, payslip details, or a P60 form. Once logged in, you can correct personal information, apply for tax refunds, update income sources, and manage Self-Assessment obligations if applicable.
The online portal provides real-time data and is a useful tool for individuals who manage multiple income streams, such as employees with side businesses or rental properties.
Using the PAYE System
For employees and pensioners, the PAYE system automatically deducts Income Tax and National Insurance from wages or pensions. Employers and pension providers send regular reports to HMRC, meaning your cumulative earnings and tax payments are updated throughout the tax year.
At the end of the tax year, HMRC performs an annual reconciliation. If you have overpaid tax, you will receive a refund; if you have underpaid, you will be notified and asked to make arrangements for payment.
Employers also issue P60 forms after the end of each tax year summarising total pay and tax deductions, which should be retained for record-keeping and checking purposes.
| Employment Status | How Tax Is Checked | Key Documents |
| Employee | PAYE System | Payslip, P60, Personal Tax Account |
| Self-Employed | Self-Assessment Tax Return | Tax Return, HMRC Portal Access |
| Pensioner | PAYE via Pension Provider | Pension Payslip, HMRC Notices |
Using the PAYE system simplifies tax compliance for most individuals, but it remains important to check that deductions and tax codes are accurate.
When You Should Contact HMRC?
There are specific instances when contacting HMRC is necessary to resolve potential tax issues. These include changes to employment status, starting or ending additional jobs, receiving untaxed income, or realising that you have been assigned an incorrect tax code.
In these cases, prompt communication with HMRC can prevent prolonged errors and the risk of large adjustments at year-end. It is advisable to keep documentation such as payslips, P60s, P45s, and employment contracts readily available when contacting HMRC to expedite the resolution process.
Maintaining regular oversight of your tax payments, alongside accurate documentation, provides confidence and assurance that you are meeting your tax obligations accurately.
Conclusion
Knowing how much you can earn before paying tax per month in the UK empowers individuals to make more informed financial decisions.
With the current Personal Allowance set at £12,570 and other allowances available, understanding the system helps you maximise your income legally.
Always consult up-to-date government resources or a professional adviser to navigate the complexities of tax thresholds and reliefs effectively.
FAQs
What is the Personal Allowance for 2025-2026?
The Personal Allowance for the 2025–2026 tax year remains £12,570, meaning most individuals can earn this amount tax-free.
How much can I earn per week without paying tax in the UK?
You can earn approximately £242.70 per week (£12,570 divided by 52 weeks) without paying Income Tax, based on the standard Personal Allowance.
Does everyone get the same Personal Allowance?
Most people get the same allowance, but it reduces for individuals earning over £100,000 and can increase if eligible for Blind Person’s Allowance.
What happens if my monthly salary fluctuates?
Your Income Tax is calculated cumulatively through the PAYE system, so overpayments or underpayments balance out by the end of the tax year.
Is National Insurance included in the Personal Allowance?
No, National Insurance thresholds are separate from Income Tax thresholds and typically apply on earnings over £1,048 per month.
How does Marriage Allowance affect my taxes?
Marriage Allowance allows you to transfer a portion of your unused Personal Allowance to your partner, reducing their tax bill by up to £252.
Can savings and dividends be completely tax-free?
Yes, up to £1,000 of savings income and £500 of dividend income can be tax-free, depending on your income bracket and applicable allowances.
