Read our guide to personal allowance income in 2022/23 about tax thresholds for employees, sole traders, self-employers, contractors, or freelancers.
The personal tax allowance income is the total of your earnings before you start paying tax. The source of income can be from an employer or from your own business activities, as in being a self-employed, contractor, or a freelancer.
How much is the current personal allowance tax?
The government sets the personal allowance each year and for 2021/22 it is £12,570. This means that if your annual income is below this amount, you will not have to pay any income tax on it.
If your annual income is above the personal allowance, you will start paying income tax at the basic rate of 20%. This means that if your annual income is £50,000, you would pay £0 in income tax on the first £12,570 and then 20% on the remaining £37,430.
When does the personal allowance tax threshold change?
Usually, personal allowance tax stays the same throughout the year and changes as of April 6, but like every other aspect of the business realm, this year was a bit different. The allowance tax changed in July due to the emergency Health and Social Care Levy. Following The spring budget of 2022, the change is announced but it`ll come into effect next year in April 2023.
How much will the personal allowance increase next year?
The government has announced that the personal allowance will increase to £13,500 for 2022/23. This means that if your annual income is below this amount, you will not have to pay any income tax on it.
If your annual income is above the personal allowance, you will start paying income tax at the basic rate of 20%. This means that if your annual income is £50,000, you would pay £0 in income tax on the first £13,500 and then 20% on the remaining £36,500.
Personal allowance is a key part of the government’s tax policy, and it is important to understand how it works. If you have any questions about your personal allowance or how much income tax you will pay, please speak to a qualified accountant or tax advisor.
Also, you can use our Salary Tax Calculator updated for the next year.
