The £12,570 Freeze: 5 Critical Facts About The UK Personal Allowance For 2025/2026 That Will Affect Your Paycheck

The UK Personal Allowance for the 2025/2026 tax year is officially frozen at £12,570. This critical figure, which represents the amount of income you can earn before paying any Income Tax, has been confirmed by HM Revenue and Customs (HMRC) and the UK Government, extending a freeze that has been in place since the 2021/2022 tax year. As of late 2025, this continued freeze is arguably the single most significant factor quietly affecting the take-home pay of millions of UK taxpayers, a phenomenon widely referred to as 'fiscal drag' or a 'stealth tax.' The decision to maintain the Personal Allowance at £12,570 for the tax year beginning April 6, 2025, and ending April 5, 2026, means that as wages rise due to inflation, a greater proportion of those earnings will be subject to Income Tax. This article breaks down the five most critical facts you need to know about the 2025/2026 allowance, detailing how the freeze impacts your finances and outlining the current Income Tax bands for England and Northern Ireland.

The Confirmed UK Personal Allowance and Tax Bands 2025/2026

The standard Personal Allowance for the 2025/2026 tax year remains fixed at £12,570. This figure is the same as the previous tax year (2024/2025) and is set to continue until the end of the 2027/2028 tax year, following a government decision to freeze the thresholds. This allowance is a tax-free amount granted to most UK residents. For every £1 earned above this amount, the Basic Rate of Income Tax (20%) is applied, until the Higher Rate threshold is reached.

Income Tax Rates and Bands (England and Northern Ireland) 2025/2026

The tax rates and the corresponding income bands for the 2025/2026 tax year remain unchanged from the previous year. | Tax Rate | Rate (%) | Taxable Income Band | Total Income (including £12,570 PA) | | :--- | :--- | :--- | :--- | | Personal Allowance | 0% | Up to £12,570 | Up to £12,570 | | Basic Rate | 20% | £12,571 to £50,270 | £12,571 to £50,270 | | Higher Rate | 40% | £50,271 to £125,140 | £50,271 to £125,140 | | Additional Rate | 45% | Over £125,140 | Over £125,140 | *Note: The tax bands for Scotland differ due to the Scottish Parliament's devolved powers over Income Tax rates.*

Fact 1: The Personal Allowance Freeze is a ‘Stealth Tax’

The most significant impact of the frozen £12,570 Personal Allowance is the effect of Fiscal Drag. Fiscal drag occurs when Income Tax thresholds are not increased in line with inflation or average wage growth. As salaries increase (often to keep pace with the cost of living), more people are pulled into paying Income Tax, or they are dragged into the higher 40% tax bracket. If the Personal Allowance had been adjusted for inflation since the freeze began, it is estimated that the figure for 2025/2026 would be significantly higher—potentially close to £15,480. By keeping the allowance at £12,570, the Government effectively increases the tax burden on millions of workers without formally raising the tax rate, hence the term 'stealth tax.' This disproportionately affects lower and middle-income earners who receive pay rises that simply move them into a higher tax band.

Fact 2: The Higher Rate Threshold is Also Frozen

It is not just the Personal Allowance that is frozen; the Higher Rate threshold is also fixed at £50,270 for 2025/2026. This means that any income earned above this amount is taxed at the 40% Higher Rate. For example, an employee who earned £48,000 in 2024/2025 and receives a 5% pay rise to £50,400 in 2025/2026 will find themselves paying 40% tax on the £130 of their income that now falls above the £50,270 threshold. This is a crucial point for professionals and mid-career employees who are on the cusp of the 40% bracket.

Fact 3: The Allowance is Tapered for High Earners

The Personal Allowance of £12,570 is not universally available. For individuals with 'Adjusted Net Income' exceeding £100,000, the allowance is reduced, or 'tapered.' The reduction is £1 for every £2 of income over £100,000. This taper creates a highly punitive effective tax rate of 60% on income between £100,000 and £125,140. * Income £100,000: Full Personal Allowance of £12,570. * Income £112,570: The Personal Allowance is reduced to zero. * Income £125,140 and above: The Personal Allowance is completely withdrawn. This specific income range is a key planning area for financial advisors and high-earning individuals seeking to mitigate the 60% tax trap, often by making pension contributions or charitable donations to reduce their Adjusted Net Income.

Fact 4: Other Key Allowances Remain Available

While the main Personal Allowance is frozen, other important tax allowances remain available to specific groups of taxpayers for the 2025/2026 tax year: * Blind Person’s Allowance: This additional tax-free allowance is available to registered blind individuals and is set at £3,070 for 2025/2026. * Marriage Allowance: This allows a spouse or civil partner who earns less than the Personal Allowance (£12,570) to transfer £1,260 of their unused allowance to their partner, provided the partner is a Basic Rate (20%) taxpayer. This can result in a tax saving of up to £252 per year. * Savings Allowance: The Personal Savings Allowance (PSA) remains in place, allowing Basic Rate taxpayers to earn up to £1,000 of interest tax-free, and Higher Rate taxpayers to earn up to £500 tax-free.

Fact 5: The Scottish Income Tax System is Separate

It is vital to remember that the Income Tax system in Scotland operates independently from the rest of the UK. The Scottish Parliament sets its own rates and bands for non-savings, non-dividend income, though the standard UK Personal Allowance of £12,570 still applies to Scottish residents. For the 2025/2026 tax year, Scottish taxpayers will face different tax bands than those in England and Northern Ireland, often including a Starter Rate, a Scottish Intermediate Rate, and a higher Advanced Rate, making the overall tax burden potentially different depending on the income level.

Planning Your Finances for the 2025/2026 Tax Year

The continued freeze of the Personal Allowance at £12,570 for 2025/2026 confirms that a primary focus for financial planning must be on mitigating the effects of fiscal drag. With the thresholds fixed, taxpayers should explore every avenue to reduce their taxable income. Key strategies for the 2025/2026 tax year include: * Maximising Pension Contributions: Contributions to a private or workplace pension reduce your taxable income and are a highly effective way to manage the 40% and 60% tax traps. * Utilising ISAs (Individual Savings Accounts): Income and gains within ISAs are shielded from Income Tax and Capital Gains Tax, making them essential for saving and investment. * Claiming Marriage Allowance: Ensure you and your partner are claiming the £1,260 transfer if eligible. * Optimising Investment Income: Making use of the Personal Savings Allowance and the Dividend Allowance (which is also subject to change and should be monitored) is crucial to minimise tax on non-employment income. The stability of the £12,570 Personal Allowance and the tax bands provides certainty, but that certainty comes with the cost of a rising real-terms tax bill for many. Staying informed about these fixed thresholds is the first step in protecting your take-home pay throughout the 2025/2026 financial year.

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