The UK tax system contains a number of allowances that let you receive certain income or gains tax-free, up to set limits. Knowing they exist is the first step — many people pay more tax than they need to simply because they didn't realise an allowance applied to them.
Some of the main ones
- Personal Allowance — the amount of income you can earn before paying any income tax. See our income tax bands guide.
- Personal Savings Allowance — lets many people earn a certain amount of savings interest tax-free, with the amount depending on which tax band you're in.
- Dividend Allowance — a tax-free amount for dividend income before dividend tax applies.
- Capital Gains Tax annual exempt amount — a level of gains you can make on selling assets before CGT is due.
- ISA allowance — not an "allowance" in quite the same sense, but a yearly limit on how much you can shelter inside ISAs, where growth and income are tax-free. See our ISA guide.
Why they matter in practice
These allowances can interact. For instance, holding investments inside an ISA can keep dividends and gains out of the reach of dividend tax and CGT entirely, which becomes more valuable as those separate allowances shrink. The order in which you use accounts — ISA first, then taxable — can make a real difference over time.
This is where general guidance ends
Allowances are an area where personal circumstances matter enormously, and the interactions get complex quickly. This guide is here to make you aware the allowances exist so you can check your own position — for anything significant, your HMRC personal tax account, or a qualified tax adviser or accountant, is the right next step. Plainpurse can't tell you how an allowance applies to your specific situation.