Fuel and travel costs are pushing prices up again
Thursday 5 November 2026
Inflation has risen to 3.1%, meaning everyday spending is getting more expensive just as household budgets are already under pressure.
Personal allowance
The amount of income most people can receive in a tax year before paying Income Tax on it.
Key term
What it means
In the UK, the Personal Allowance is an amount of income that is normally free from Income Tax. If someone's income rises above it, they normally pay Income Tax on the part above the allowance, not on their entire income. The allowance can be reduced for some higher incomes, and other rules can affect whether it applies. It is separate from National Insurance. Its money amount can change, so check the tax year when you see a figure.
Example
Imagine a made-up Personal Allowance of £10,000 and a person earning £15,000. Ignoring all other rules, £10,000 would be free of Income Tax and £5,000 would be considered for Income Tax. This is not a current UK threshold.
Why it matters
It helps explain why two people on different incomes can pay different shares of their income in tax, and why a tax threshold matters even if the stated tax rate stays the same.
Also known as
Income Tax personal allowance
Related terms
-
Effective tax rate
The total tax someone pays, shown as a percentage of the income or other amount being measured.
Read more -
Fiscal drag
When rising incomes lead to more tax because tax-free amounts or tax thresholds have not kept up.
Read more -
Marginal tax rate
The tax rate that applies to the next pound of income you earn.
Read more -
Progressive tax
A tax under which people with more income pay a larger share of it in tax.
Read more -
Tax expenditure
Support provided through a targeted tax break instead of a direct payment from public funds.
Read more
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