Most UK taxpayers know about the Personal Allowance, but there are several other tax-free thresholds that, combined, allow a strategic earner to keep up to £17,000 or more per year completely tax-free.
Personal Allowance
The Personal Allowance is the amount of income you can earn each tax year before paying income tax. In 2026/27, it remains frozen at £12,570, and the government has extended the freeze to April 2031. It's reduced by £1 for every £2 you earn over £100,000.
- £12,570 Personal Allowance (frozen until April 2031)
- Applies to employment, self-employment, rental, pension income
- Reduced for income over £100,000 (fully withdrawn at £125,140)
- Marriage Allowance: £1,260 can be transferred to lower-earning partner
- Blind Person's Allowance: additional £3,250 (2026/27) if registered blind or severely sight impaired
Savings and Dividend Allowances
In addition to the Personal Allowance, there are separate tax-free amounts for interest and dividends. The Personal Savings Allowance allows basic rate taxpayers to earn up to £1,000 in interest tax-free. Dividends have a £500 annual tax-free allowance.
- Personal Savings Allowance: £1,000/year (basic rate), £500 (higher rate)
- Dividend Allowance: £500/year
- ISA interest: completely tax-free, no limit
- Starting Rate for Savings: up to £5,000 at 0% if total income is low
- Premium Bonds prizes: tax-free regardless of amount
Rental and Trading Allowances
Property and trading allowances allow you to earn up to £1,000 each from these activities without paying tax or filing a return.
- Property Income Allowance: £1,000/year from property rental
- Trading Allowance: £1,000/year from self-employment or selling goods
- Rent-a-Room Relief: up to £7,500/year tax-free from a lodger
- HMRC trivial benefits: £50 per benefit for employees
- Cannot combine Property Allowance with mortgage interest deduction
Can a couple double their tax-free allowances?
Yes, for most allowances. Each individual has their own Personal Allowance, Personal Savings Allowance, and Dividend Allowance. A couple can shelter twice the individual amounts.
Capital Gains Tax Allowance
Capital Gains Tax has its own annual allowance of £3,000 in 2026/27. Gains on assets up to this limit are tax-free. This has fallen from £12,300 in 2022/23, making ISAs and SIPPs more important for protecting investment gains.
- CGT Annual Exempt Amount: £3,000 (2026/27)
- Gains within your ISA: no CGT ever
- Main home sale: exempt under Private Residence Relief
- CGT rates: 18% within the basic rate band and 24% above it, on all assets (including residential property) since 30 October 2024
- Transfer assets between spouses to use both CGT allowances
- tax free allowance
- personal allowance
- income tax
- capital gains
- tax uk 2026