What does the ‘Personal Tax Allowance’ mean?#AskAMS

Every person who is resident in the UK is given a personal allowance each tax year. It operates as follows:

The personal allowance is the amount of income you can receive before paying tax – and it generally increases each tax year.  For the 2020/21 tax year, it is £12,500.  So, if you earn £20,000 in 2020/21, you will be subject to income tax on £7,500 of your earnings.

The personal allowance is reduced when your income exceeds £100,000 in a tax year (by £1 for every £2 your income exceeds £100,000) – so that if your taxable income reaches £125,000 (in 2020/21), you no longer receive a personal allowance.

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