Personal Allowance 2023-24: An In-Depth Guide for UK Taxpayers

The Personal Allowance is one of the most important parts of the UK tax system, yet it is also one of the most misunderstood. I regularly speak to people who know they have one but are unsure how it actually works, why their allowance looks different from someone else’s, or why it seems to disappear as their income increases.

In this article, I will explain the Personal Allowance for the 2023/24 tax year in clear, practical terms. I will cover how much it is, who gets it, when it is reduced or lost, and how it applies in real life. Everything here reflects UK tax rules for the year ending 5 April 2024 and what I see daily when dealing with PAYE and Self Assessment taxpayers.

What the Personal Allowance Is

The Personal Allowance is the amount of income you can earn in a tax year before you start paying Income Tax.

It does not mean your income is ignored completely. It simply means that the first part of your income, up to the allowance, is taxed at zero percent.

Once your income exceeds the allowance, Income Tax applies to the excess at the relevant tax rates.

The Personal Allowance for 2023/24

For the 2023/24 tax year, the standard Personal Allowance is:

£12,570

This applies to most people who are UK tax resident and have income below certain thresholds.

If your total income for the year is £12,570 or less, you will not normally pay any Income Tax.

What Income Counts Towards the Personal Allowance

The Personal Allowance applies to most types of taxable income, not just wages.

This includes:

• Employment income
• Self employed profits
• Rental income
• Pension income
• Certain benefits
• Interest and dividends that fall outside tax free wrappers

All taxable income is added together to determine whether your Personal Allowance is fully available or reduced.

How the Personal Allowance Works in Practice

The allowance is applied automatically in most cases.

If you are employed, it is usually built into your tax code so that Income Tax is only deducted once your earnings exceed the allowance.

If you complete a Self Assessment tax return, the allowance is applied as part of the calculation rather than through payroll.

A common misunderstanding I see is people thinking the allowance is something they must claim. In most cases, it is applied automatically.

What Happens If You Have More Than One Job

If you have more than one job, the Personal Allowance is usually allocated to only one source of income.

This is why second jobs are often taxed from the first pound. It does not mean you lose the allowance, it just means it is being used elsewhere.

HMRC decides how the allowance is allocated based on the information they have, but this can sometimes be changed if it does not reflect reality.

The Personal Allowance and High Earners

This is where confusion increases.

If your adjusted net income exceeds £100,000 in the 2023/24 tax year, your Personal Allowance starts to be reduced.

The rule works as follows:

• For every £2 you earn over £100,000, you lose £1 of Personal Allowance
• Once income reaches £125,140, the allowance is reduced to zero

This creates a very high effective tax rate in this income band, something I regularly explain to clients who are caught out by it.

Adjusted Net Income Explained Simply

Adjusted net income is not always the same as your headline salary.

It takes into account things such as:

• Pension contributions
• Gift Aid donations
• Certain losses or reliefs

This means some people earning over £100,000 can preserve some or all of their Personal Allowance through planning, particularly with pension contributions.

Personal Allowance and Self Employed Individuals

Self employed people also receive the Personal Allowance.

The key difference is timing and visibility. Instead of seeing the allowance applied through a payslip, it is applied when the Self Assessment return is calculated.

From my experience, many sole traders forget this and assume all profit is taxed. It is not. The allowance still shelters the first £12,570 of taxable profit, assuming income is below the taper threshold.

Marriage Allowance and the Personal Allowance

The Marriage Allowance allows some couples to transfer a portion of the Personal Allowance from one partner to the other.

This applies where:

• One partner earns less than the Personal Allowance
• The other partner is a basic rate taxpayer

The transfer does not change the overall allowance, but it can reduce the receiving partner’s tax bill.

This is a simple relief but one that is frequently missed.

When You Might Not Get the Full Personal Allowance

You may not receive the full Personal Allowance if:

• Your income exceeds £100,000
• You are non UK resident for tax purposes
• HMRC has restricted your allowance due to underpaid tax
• Your tax code is incorrect

This is why reviewing tax codes is important, especially if income or circumstances change.

Common Misunderstandings I See

Based on my experience, there are a few misunderstandings that come up repeatedly.

One is thinking that moving into a higher tax band means the allowance is lost. It is not. The allowance is only affected once income exceeds £100,000.

Another is assuming the allowance resets monthly. It does not. It applies to the tax year as a whole.

I also see people confuse the Personal Allowance with the tax free amount on pensions or ISAs. These are separate concepts with different rules.

How an Accountant Helps With Personal Allowance Issues

An accountant helps by ensuring the Personal Allowance is applied correctly and not lost unnecessarily.

This includes:

• Checking tax codes
• Reviewing adjusted net income
• Advising on pension contributions and Gift Aid
• Correcting errors through Self Assessment
• Explaining why tax bills look the way they do

From my perspective, the allowance is simple in theory but often mishandled in practice.

Key takeaways

For the 2023/24 tax year, the Personal Allowance allows most people to earn £12,570 before paying Income Tax. It is a fundamental part of the UK tax system and one of the most valuable reliefs available.

The complexity comes not from the allowance itself, but from how it interacts with income levels, multiple income sources, and high earner rules.

From my experience, once people understand how the Personal Allowance really works, many tax calculations that once felt confusing suddenly make sense.