Each of us has a personal allowance. This is the amount we can earn without paying any Income Tax.
If you earn more than your personal allowance, you pay tax at the applicable income tax rate on all earnings above the personal allowance, but the allowance itself remains untaxed.
The standard Personal Allowance is £12,500 for the tax year 2020/21
Income tax thresholds for 2020-2021
|Band||Taxable income||Tax rate|
|Personal Allowance||Up to £12,500||0%|
|Basic rate||£12,501 to £50,000||20%|
|Higher rate||£50,001 to £150,000||40%|
|Additional rate||over £150,000||45%|