The Personal Allowance is the income you can earn each tax year before Income Tax applies. For 2025/26, the official Personal Allowance remains £12,570. A rise to £20,000 has been discussed publicly, but it is not confirmed in law.
This article gives you a real-world snapshot of what’s official now and a clear, worked example of how much you’d keep if the allowance were raised to £20,000—so you can plan smartly either way.
What’s official for 2025/26 (right now)
- Personal Allowance: £12,570
- Income Tax rates (rUK): 20% basic, 40% higher, 45% additional (Scotland uses different bands, but the UK-wide Personal Allowance applies)
- Allowance taper: Above £100,000 income, the allowance is reduced by £1 for every £2, reaching £0 at £125,140
If it rose to £20,000: how much more would you keep?
Moving from £12,570 → £20,000 adds £7,430 of tax-free income. For most basic-rate taxpayers, that’s a saving of 20% × £7,430 = £1,486 per year (about £124/month). Higher-rate and additional-rate taxpayers would still save on that first slice, subject to the taper above £100,000.
Illustrative savings table (Income Tax only)
| Annual Gross Income | Tax-Free Now | If £20,000 PA | Extra Tax-Free | Tax Saved/Year |
|---|---|---|---|---|
| £18,000 | £12,570 | £18,000 (all) | £5,430 | £1,086 |
| £20,000 | £12,570 | £20,000 (all) | £7,430 | £1,486 |
| £30,000 | £12,570 | £20,000 | £7,430 | £1,486 |
| £55,000 | £12,570 | £20,000 | £7,430 | £1,486 |
| £110,000* | Tapered | Tapered | Varies | Varies |
*Above £100,000, your Personal Allowance is tapered, so savings reduce as income rises.
Who would gain the most?
- Low and middle earners: Clear, predictable saving of up to £1,486/year.
- Part-time workers and those with multiple small incomes: More pay sits in the tax-free band.
- Pensioners with modest private pensions: Less chance of paying Income Tax once combined income stays within the allowance.
- Higher earners: Save on the first slice, but the allowance taper cuts benefits above £100,000.
PAYE vs Self Assessment — how it would show up
If a rise happened, HMRC would update PAYE tax codes automatically. You’d see a lower Income Tax deduction on your payslip soon after the change date.
Self-employed people would feel the impact when filing Self Assessment for 2025/26. Until any legal change, pay and returns continue to assume £12,570.
Don’t forget National Insurance
National Insurance (NI) is separate from Income Tax, with its own thresholds and rates. A higher Personal Allowance doesn’t automatically change NI. Always check both lines on your payslip to understand the true take-home impact.
Practical planning tips
- Budget the potential uplift: If your pay sits around £18k–£30k, the £1,486/year illustration shows what a change could mean for savings, debt payoff, or energy bills.
- Watch the taper: If you’re near £100,000, consider the allowance taper when planning bonuses or additional work.
- Use calculators wisely: Run scenarios for both current rules and a £20,000 allowance to stress-test your budget.
Right now, the Personal Allowance is £12,570. If it rose to £20,000, many workers would keep up to £1,486/year more in take-home pay.
Until any legal change happens, plan based on current rules, keep an eye on tax-code updates, and review both Income Tax and National Insurance to understand your net position.
FAQs
Has the £20,000 Personal Allowance been confirmed for 2025/26?
No. The confirmed 2025/26 allowance is £12,570. A £20,000 figure has been discussed but is not in force.
How much would I save if it did become £20,000?
Most basic-rate taxpayers would keep about £1,486 more per year (roughly £124 per month). Actual amounts depend on your income and any taper.
Do Scottish taxpayers have a different Personal Allowance?
No. Scotland sets different rates/bands, but the Personal Allowance level is UK-wide.
