The £12,570 Freeze: 5 Critical Facts About The UK Personal Allowance For 2025/2026
The UK Personal Allowance (PA) for the 2025/2026 tax year is officially confirmed to remain at £12,570. This figure, which represents the amount of income an individual can earn before paying any Income Tax, is a critical piece of financial information for every UK taxpayer. The current tax year runs from 6 April 2025 to 5 April 2026, and understanding this allowance is the first step in managing your personal finances effectively.
As of late 2025, the key financial story surrounding the Personal Allowance is not a rise, but a prolonged freeze. This policy, first announced in 2021 and later extended, has significant implications for millions of workers, effectively pulling more people into paying higher rates of tax due to a phenomenon known as 'fiscal drag'. This in-depth guide breaks down the confirmed figures and explains exactly what the fixed allowance means for your take-home pay.
The Confirmed UK Personal Allowance and Tax Thresholds for 2025/2026
The Personal Allowance is the cornerstone of the UK's Income Tax system. For the 2025/2026 tax year, the core figures are not changing, which is a direct result of the government's policy decision to freeze tax thresholds.
- Standard Personal Allowance (PA): £12,570
- Basic Rate Tax Band: £12,571 to £50,270
- Higher Rate Tax Threshold (HRT): £50,271
- Additional Rate Tax Threshold: £125,140
It is crucial to remember that the Personal Allowance is a UK-wide figure, but the Income Tax rates and bands applied to taxable income above this allowance differ slightly across the four nations. The rates listed above apply to taxpayers in England, Wales, and Northern Ireland (the main UK tax system). Scotland operates its own separate system of Income Tax rates and bands.
The UK-Wide Income Tax Rates (Excluding Scottish Taxpayers)
Once you earn above the £12,570 Personal Allowance, your income is taxed at the following rates:
- Basic Rate: 20% on income between £12,571 and £50,270.
- Higher Rate: 40% on income between £50,271 and £125,140.
- Additional Rate: 45% on income above £125,140.
These rates apply to non-savings and non-dividend income, such as your salary or pension. Separate, lower rates apply to savings and dividend income, which also benefit from their own tax-free allowances, such as the Dividend Allowance and the Personal Savings Allowance.
The Extended Freeze: Why the Personal Allowance is Not Rising
The figure of £12,570 is not new. It has been the standard Personal Allowance since the 2021/2022 tax year. The government initially announced a freeze on this allowance and the Higher Rate Threshold until April 2026. This freeze was then controversially extended in a later Autumn Statement until the end of the 2027/2028 tax year, meaning the £12,570 figure is set to remain static until April 2028.
This decision is the single most important factor influencing personal taxation for the 2025/2026 period. Historically, the Personal Allowance would increase each year in line with inflation, ensuring that the lowest earners did not see their tax burden increase simply due to rising prices and wages.
By freezing the allowance, the government generates additional tax revenue without explicitly raising tax rates. This is a form of 'stealth tax' that affects nearly every working individual in the UK.
The Hidden Impact of 'Fiscal Drag' on Your 2025/2026 Pay Packet
The term 'fiscal drag' is the key financial concept to understand in relation to the frozen Personal Allowance. This occurs when tax thresholds are not increased in line with wage inflation. As a result, when your salary rises—even if it's just to keep pace with the cost of living—a larger proportion of your total income falls into a taxable band.
For the 2025/2026 tax year, the effects of fiscal drag are particularly acute. Had the Personal Allowance been indexed to inflation since the freeze began, it would likely be significantly higher than £12,570. Some estimates suggest the allowance could have been around £15,480 by 2025/2026. This difference of nearly £3,000 in tax-free income represents a substantial hidden tax increase for millions of taxpayers.
How Fiscal Drag Affects Different Earners
- Lower Earners: Those earning just above the PA are pulled deeper into paying the 20% Basic Rate of Income Tax.
- Middle Earners: A pay rise is more likely to push them across the £50,270 Higher Rate Threshold, meaning a larger portion of their income is taxed at 40%.
- Higher Earners: The freeze on the Additional Rate Threshold at £125,140 means more high-income individuals are paying the 45% rate sooner.
In essence, the freeze is a powerful mechanism for increasing the tax burden on working individuals without the need for a headline-grabbing tax rate hike.
Key Entities and Specific Rules for the 2025/2026 Allowance
While £12,570 is the standard figure, there are two major rules that can change your personal tax-free allowance for the 2025/2026 tax year. These rules are crucial for taxpayers earning higher incomes or those who are married or in a civil partnership.
1. The High-Income Restriction (Income Over £100,000)
The Personal Allowance is not a universal entitlement. It is progressively reduced for individuals whose 'adjusted net income' exceeds £100,000. For every £2 earned over this limit, the Personal Allowance is reduced by £1.
This means that the allowance is completely withdrawn once an individual's income reaches £125,140. For someone earning between £100,000 and £125,140, their effective marginal tax rate can be as high as 60% due to the combined effect of the 40% Higher Rate Tax and the withdrawal of the 20% tax-free allowance.
2. The Marriage Allowance
The Marriage Allowance is a separate entity that allows an individual to transfer 10% of their Personal Allowance to their spouse or civil partner, provided both are not higher-rate taxpayers. For the 2025/2026 tax year, this transfer amount is fixed at £1,260 (10% of £12,570 rounded up).
This transfer can reduce the recipient's tax bill by up to £252 per year (20% of the transferred amount). It is a vital tax relief that many eligible couples fail to claim, so checking eligibility with HMRC is highly recommended.
Preparing Your Finances for the 2025/2026 Tax Year
Given the confirmed freeze on the Personal Allowance and the Higher Rate Threshold, financial planning for the 2025/2026 tax year should focus on maximising your use of other available tax-efficient wrappers and allowances. The stability of the tax code (usually 1257L for those with the full allowance) means your monthly tax deductions should be predictable, but the overall tax burden is increasing due to fiscal drag.
Consider maximising contributions to your pension, as this is one of the most effective ways to reduce your taxable income. Pension contributions are deducted from your income before tax is calculated, which can lower your adjusted net income and help you stay below the £50,270 Higher Rate Threshold or even the £100,000 allowance withdrawal limit. Additionally, utilising your ISA allowance and Capital Gains Tax allowance remains a critical strategy to protect your savings and investment returns from the effects of the prolonged tax freeze.
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