1. You Can Earn £18,570 Tax-Free in 2025/26
Thanks to a smart mix of three government tax allowances, millions in the UK can legally avoid paying income tax on up to £18,570 this year.
2. No Special Sign-Up Needed
This isn’t a grant or scheme from the DWP. It’s built into the tax system—and most of it works automatically based on how much you earn and save.
3. Personal Allowance – £12,570 Tax-Free
Every individual in the UK can earn up to £12,570 in income per year without paying any income tax. This applies whether your income is from a job, pension, or certain benefits.
4. Starting Rate for Savings – Up to £5,000 Extra
If your non-savings income is below £12,570, you could also receive up to £5,000 of savings interest tax-free. Ideal for pensioners and low-income earners with savings.
5. How the Savings Rate Works
This £5,000 allowance decreases as your income rises. For every £1 earned above £12,570, the starting savings rate allowance reduces by £1.
6. Example: Earn £10,000 from Pension
If your pension income is £10,000, you’ll still get the full £5,000 savings allowance, allowing for a total of £17,570 tax-free.
7. Personal Savings Allowance – £1,000 More
On top of the above, basic-rate taxpayers (20%) get another £1,000 tax-free savings interest. That means even higher interest earnings can be tax-free.
8. Higher and Additional Rate Taxpayers Get Less
If you’re a higher-rate taxpayer (40%), your Personal Savings Allowance drops to £500. Additional-rate taxpayers get no allowance at all.
9. Great News for Low Earners & Retirees
This combination of allowances is perfect for pensioners, part-time workers, and those living off savings. It lets them keep more of what they earn without worrying about tax.
10. Maximise It with Smart Planning
To benefit fully, make sure your income sources and savings are structured wisely. Use tax-free ISAs, high-interest accounts, and plan income to stay under the key thresholds.
