Millions of taxpayers across the United Kingdom are set to benefit from a major update in income tax rules. HM Revenue & Customs (HMRC) has officially announced that the tax-free Personal Allowance will increase from £12,570 to £13,570 starting from the 2026/27 tax year.
This change will allow individuals to earn more money before paying income tax, providing welcome relief for low- and middle-income earners.
What Is the Personal Allowance?
The Personal Allowance is the amount of income an individual can earn each year without paying income tax. This applies to most UK taxpayers, including employees, self-employed workers, and pensioners.
Previously, the allowance was £12,570, which meant income up to this amount was completely tax-free. Income above this threshold was taxed at standard income tax rates.
Key Details of the New Rule
Under the latest announcement:
- New Personal Allowance: £13,570
- Previous Allowance: £12,570
- Increase: £1,000
- Effective Date: 6 April 2026
This increase allows taxpayers to keep more of their earnings, effectively reducing the income tax paid for the year. It is designed to help households cope with the rising cost of living and provide more disposable income for everyday expenses.
Income Tax Rates After the Allowance
Once income exceeds the Personal Allowance, it is taxed at the following rates:
- Basic Rate: 20% on income from £13,570 to £50,270
- Higher Rate: 40% on income from £50,271 to £125,140
- Additional Rate: 45% on income above £125,140
Individuals earning above £100,000 will see their allowance reduced gradually, so high earners may receive less benefit from this increase.
Who Benefits the Most?
The increase in the Personal Allowance primarily benefits:
- Employees earning below £50,000
- Self-employed individuals
- Pensioners with taxable income
- Households on low and middle incomes
For many taxpayers, this extra £1,000 tax-free income can make a meaningful difference in their monthly take-home pay, easing financial pressures.
Summary of Key Figures
| Item | Amount / Detail (2026/27) |
|---|---|
| Personal Allowance (Previous) | £12,570 |
| New Personal Allowance | £13,570 |
| Increase | £1,000 |
| Basic Tax Rate | 20% |
| Higher Tax Rate | 40% |
| Additional Tax Rate | 45% |
| Effective Date | 6 April 2026 |
| Allowance Reduction Threshold | £100,000 |
What This Means
With the new Personal Allowance of £13,570, taxpayers will see a reduction in taxable income, resulting in lower annual tax bills.
This change is particularly important for those who were previously affected by static allowances while the cost of living increased. HMRC will adjust tax codes automatically, so employees usually do not need to take any action.
The rise in the tax-free Personal Allowance to £13,570 is a positive change for millions of UK taxpayers. It increases the amount of income individuals can earn without paying tax, supporting households and providing financial relief.
While tax rates remain the same, this adjustment ensures more money stays in taxpayers’ pockets, offering a practical benefit in everyday life.
FAQs
What is the new Personal Allowance?
The Personal Allowance will rise to £13,570, meaning more income is tax-free each year.
Who benefits most from this change?
Employees, self-employed individuals, and pensioners earning under £100,000 will see the largest benefit.
Does this change reduce tax rates?
No, the income tax rates stay the same, but more income is now tax-free, reducing overall tax payments.