Your Personal Allowance is an amount set by the Government that you can earn before paying any tax. The Personal Allowance in the UK is currently (2017/2018) £11,500.

Your Personal Allowance may be bigger if you claim Marriage Allowance or Blind Person’s Allowance. You should also watch out if your income is over £100,000 as your Personal Allowance will be reduced.

How do I receive my Personal Allowance?

You automatically receive your personal allowance either by your Employer when they pay your salary or as part of working out you tax under Self Assessment.

What Happens if I Earn More than the Personal Allowance?

You pay income tax on earnings above your Personal Allowance.  The amount you pay is worked out according to different bands.  These bands for 2017/2018 are as follows:

Band Taxable income Tax rate
Personal Allowance Up to £11,500 0%
Basic rate £11,501 to £45,000 20%
Higher rate £45,001 to £150,000 40%
Additional rate over £150,000 45%
An Example:
Carlos earns £30,000 for the tax year 2017/2018.  He will pay tax of £3,700 and this is worked out as follows:
On the first £11,500 0% = £o
On the next £18,500 20% = £3,700