Continuing in our series of specific updates following the autumn Budget, here is a short focus on Personal Allowance rates and Income Tax thresholds.

For a more comprehensive deep dive on the Budget, see our Tax Compass Podcast on the 2024 Budget.

In last month’s budget, Reeves announced that personal allowance rates and income tax thresholds, which have been frozen since 2021-22, will begin to rise with inflation from 2027-28. 

In reality, this means that until the end of the tax year 2027-28, the personal allowance* rate will remain at £12,570 per year, the basic rate tax bracket will remain £37,700 per year and the higher rate tax bracket will remain £87,440 per year. Any income in excess of £125,1540 (which is £37,700 + 87,4440) will be taxed at 45% (39.35% for dividends).

Anyone with income exceeding £100,000 will start to see an abatement of the personal allowance (there will be no allowance for those with income in excess of £125,140). There is also a loss of personal allowance for anyone who claims the Remittance Basis (or Foreign Income and Gains regime from 6 April 2025 onwards) in the relevant tax year.

While it is good news that there is an end date for the freeze, it does still mean that we have three more tax years of the freeze to manage before the personal allowance and tax thresholds begin to rise in line with inflation. 

If you have any questions about personal allowance or income tax rates, or how to manage your income, especially over the next three years, then please get in touch. As experts in UK tax, we are ready and able to advise you about how best to manage your financial interests. 

See more of our Budget Short on the Personal Allowance and Income Tax changes here:

Definitions: 

*Personal allowance – If available to you, this is the amount of money that you can earn before you have to pay tax.

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