The short version: A tax allowance is an amount you can earn or receive before tax kicks in. The UK has lots of different allowances for different types of income.
Common allowances
Personal Allowance lets you earn a certain amount before paying Income Tax. Trading Allowance covers small amounts of self employment income. Property Allowance does the same for rental income. Dividend Allowance covers dividends. Personal Savings Allowance covers interest. Capital Gains Tax Allowance covers profits from selling assets.
How are they different from reliefs?
Allowances let you earn tax free up to a limit. Reliefs reduce your tax bill on income above allowances. Both save you money, just in different ways.
Do you have to claim them?
Some apply automatically (like the Personal Allowance through PAYE). Others you need to claim through Self Assessment or by contacting HMRC.
Want to check you’re using all your allowances? Let us review your tax situation.
