Not every pound you earn is taxed. HMRC gives every UK taxpayer a tax-free personal allowance, and on top of that there are several specific reliefs — for savings, dividends, marriage, blindness, small trading and property income, and more. Used together, they can meaningfully reduce what you owe.
The two kinds of tax-free income
There are two distinct mechanisms that keep part of your income out of tax:
- Allowances — a slice of income you can earn before any tax is due (for example, the personal allowance).
- Reliefs — specific deductions or rate reductions you can claim against income you have already received (for example, marriage allowance or dividend allowance).
UK income tax thresholds at a glance
The table below summarises the main thresholds for the 2021–22 and 2020–21 tax years. Bands apply to England, Wales and Northern Ireland; Scotland has its own rates (see below).
| Allowance / band | 2021–22 | 2020–21 |
|---|---|---|
| Personal allowance (tax-free income) | £12,570 (tapered above £100,000) | £12,500 (tapered above £100,000) |
| Basic rate — 20% | £1 – £37,700 above the allowance | £1 – £37,500 above the allowance |
| Higher rate — 40% | Taxable income above £37,700 | Taxable income above £37,500 |
| Additional rate — 45% | Taxable income above £150,000 | Taxable income above £150,000 |
| Blind person's allowance | £2,520 | £2,500 |
| Capital gains tax annual exemption | £12,300 | £12,300 |
| Inheritance tax nil-rate band | £325,000 + £175,000 if the estate includes a family home | £325,000 + £175,000 if the estate includes a family home |
The personal allowance (2021–22)
Almost everyone gets a personal allowance — a flat amount of income you can receive each year before income tax kicks in. For 2021–22 it is £12,570. In England, Wales and Northern Ireland, income above the allowance is taxed at 20% up to £50,270, then 40% above that, and 45% above £150,000.
Scottish rates
Scotland operates its own bands on top of the same personal allowance:
| Band | Taxable income (2021–22) | Rate |
|---|---|---|
| Starter rate | £12,571 – £14,667 | 19% |
| Basic rate | £14,668 – £25,296 | 20% |
| Intermediate rate | £25,297 – £43,662 | 21% |
| Higher rate | £43,663 – £150,000 | 41% |
| Top rate | Over £150,000 | 46% |
Income above £100,000
Once your income passes £100,000, the personal allowance is withdrawn at a rate of £1 for every £2 earned over the limit. By the time income reaches £125,140 the allowance has disappeared entirely and every pound is taxable.
Marriage allowance
If you are married or in a civil partnership, you may be able to transfer part of your unused personal allowance to your spouse — provided one of you is a non-taxpayer (typically earning under £12,570) and the other is a basic-rate taxpayer. The transfer is worth up to £252 off the higher earner's tax bill for 2021–22.
A separate, more generous Married Couple's Allowance exists where at least one spouse was born before 6 April 1935.
Savings and dividend allowances
Interest on savings and dividends from investments each have their own tax-free amounts, on top of the personal allowance:
| Allowance | Basic-rate taxpayer | Higher-rate taxpayer | Additional-rate taxpayer |
|---|---|---|---|
| Personal savings allowance | £1,000 | £500 | £0 |
| Dividend allowance | £2,000 | £2,000 | £2,000 |
| Dividend tax rate above the allowance | 7.5% | 32.5% | 38.1% |
These figures are unchanged from 2020–21.
Blind person's allowance
If you, your spouse or your civil partner is registered blind or severely sight-impaired, the personal allowance is increased by £2,520 for 2021–22 — bringing the total tax-free amount to £15,090. Both partners can claim independently if both qualify.
- England and Wales: you must hold a certificate of visual impairment and be on the local authority's register.
- Scotland and Northern Ireland: a formal certificate isn't required — you qualify if your sight is so poor that you can't perform work for which eyesight is essential.
- If you don't have enough income to use the full allowance, the unused portion can be transferred to your spouse or civil partner, in the same way as the marriage allowance.
Trading and property allowances
Casual side income is covered by two separate £1,000 allowances:
| Allowance | Tax-free amount | Typical examples |
|---|---|---|
| Trading allowance | £1,000 | Selling on eBay, small freelance gigs, casual services |
| Property allowance | £1,000 | Letting a garden for an event, short-term room rental |
You can claim both at the same time. If your property income is higher, the Rent a Room scheme (up to £7,500 tax-free for letting a furnished room in your own home) or normal rental accounting will usually leave you better off than the £1,000 allowance.
Maintenance payments relief
Tax relief on maintenance payments to a former spouse or civil partner is still available — but only in a narrow set of circumstances. You can claim it if all of the following apply:
- You or your former partner were born before 6 April 1935;
- The payments are made under a court order following the end of the relationship;
- Your ex-partner has not remarried or entered a new civil partnership, or the payments support children under 21.
The relief is worth 10% of the maintenance paid, up to a maximum of £326 a year (10% of £3,260).
Quick reference: what each allowance can save you
| Relief | Who it's for | Maximum benefit (2021–22) |
|---|---|---|
| Personal allowance | Almost all taxpayers | £12,570 of income tax-free |
| Marriage allowance | Couples where one earns under £12,570 | £252 off the tax bill |
| Personal savings allowance | Basic and higher-rate taxpayers | £1,000 / £500 interest tax-free |
| Dividend allowance | Anyone receiving dividends | £2,000 dividends tax-free |
| Blind person's allowance | Registered blind / severely sight-impaired | £2,520 extra tax-free |
| Trading + property allowances | Casual side income | £1,000 each, tax-free |
| Maintenance payments relief | Pre-1935 spouses paying maintenance | Up to £326 off the tax bill |
Allowances and bands change with every Budget, so always confirm the current figures before filing. If you'd like us to review your position and make sure you're using every relief available to you, get in touch — we'll handle the calculations and the return for you.
