UK Tax Allowances Guide (All Personal Allowances 2026/27)

Personal Allowances Overview

For the 2026/27 tax year, the key allowances are: personal allowance £12,570; personal savings allowance £1,000 (basic rate), £500 (higher rate), £0 (additional rate); dividend allowance £500; Capital Gains Tax allowance £3,000; ISA allowance £20,000; Junior ISA allowance £9,000; Lifetime ISA allowance £4,000 (of the £20,000); pension annual allowance £60,000; marriage allowance £1,260; trading allowance £1,000; rent-a-room relief £7,500; property allowance £1,000.

Many of these allowances are "use it or lose it" — they cannot be carried forward to the next tax year (with the exception of pension annual allowance, which has a 3-year carry-forward rule, and the marriage allowance, which can be backdated 4 years). The end of the tax year (5 April) is the deadline for using them, which is why tax year-end planning is so important.

Savings Allowance

The starting rate for savings means you can earn up to £5,000 in savings interest at 0% if your earned income is below £17,570. This is separate from the personal savings allowance. The personal savings allowance then gives basic-rate taxpayers £1,000 of tax-free interest, higher-rate taxpayers £500, and additional-rate taxpayers nothing. Interest within an ISA is always tax-free and does not use any of these allowances.

To optimise savings income: use your personal savings allowance first, then your ISA allowance (£20,000), and finally consider premium bonds (which are tax-free). If you are a basic-rate taxpayer and your total income is under £17,570, you can earn up to £6,000 in interest tax-free (£5,000 starting rate + £1,000 PSA). For couples, splitting savings across both partners can double the available allowances.

ISA Allowance

The ISA allowance is £20,000 per tax year. You can split this across Cash ISAs, Stocks and Shares ISAs, Innovative Finance ISAs, and Lifetime ISAs (up to £4,000 of the £20,000 into a LISA). The Junior ISA allowance is £9,000 per child. ISAs provide complete tax shelter: no Income Tax on dividends or interest, no Capital Gains Tax on growth, and no tax on withdrawals. Use the full allowance before 5 April each year — any unused allowance is lost.

You can only subscribe to one Cash ISA and one Stocks and Shares ISA per tax year (except for transfers). The £20,000 allowance is per person, so a married couple can shelter £40,000 per year. For long-term investing, the Stocks and Shares ISA is usually the best choice — see our Stocks and Shares ISA guide.

Pension Annual Allowance

The pension annual allowance is £60,000 (gross, including employer contributions). This is the maximum you can contribute to all your pension schemes each year while still receiving tax relief. The allowance is tapered for high earners: if your "adjusted income" exceeds £260,000 (including employer pension contributions), your allowance reduces by £1 for every £2 of excess, down to a minimum of £10,000. The threshold is based on "threshold income" (earnings minus personal contributions) — if this is under £200,000, the taper does not apply.

If you have flexibly accessed a defined contribution pension (taken income above the tax-free cash), the Money Purchase Annual Allowance (MPAA) of £10,000 applies. Carry forward allows you to use unused allowance from up to 3 previous tax years, provided you were a member of a pension scheme in those years. This is valuable for catching up on contributions after a period of reduced saving.

Venture Capital Trusts and EIS Reliefs

For high earners who have already maximised their ISA and pension allowances, Venture Capital Trusts (VCTs) and Enterprise Investment Schemes (EIS) offer additional tax relief. VCTs provide 30% Income Tax relief on investments up to £200,000 per year, provided the shares are held for at least 5 years. Dividends from VCTs are tax-free, and capital gains on VCT shares are exempt from CGT. VCTs invest in small, unquoted UK companies — they carry higher risk, but the generous tax reliefs offset some of that risk. The 30% upfront relief means a £10,000 VCT investment costs just £7,000 after tax relief, and any dividends are completely tax-free.

EIS offers 30% Income Tax relief on investments up to £1 million per year (£2 million for knowledge-intensive companies), with the shares held for at least 3 years. EIS also offers CGT deferral (you can defer capital gains from other assets by investing in EIS), CGT-free growth on the EIS shares, and loss relief (if the shares fall in value, you can offset the loss against Income Tax or CGT). SEIS (Seed Enterprise Investment Scheme) offers 50% Income Tax relief on investments up to £20,000 per year, plus CGT reinvestment relief. These schemes are genuinely high risk — many early-stage companies fail — but the tax reliefs are very generous. They are best suited to sophisticated investors who understand the risks and can afford to lose their capital. For most investors, maximising ISA and pension allowances should come first, with VCTs/EIS considered only as a top-up for larger investment portfolios.

Marriage Allowance

The marriage allowance lets you transfer £1,260 of your personal allowance to your spouse or civil partner. To be eligible: both must be born after 6 April 1935, one must have no income tax to pay (income below the personal allowance), and the other must be a basic-rate taxpayer. The transfer saves the higher earner up to £252 per year (20% of £1,260).

You can claim online through the gov.uk website in under 5 minutes. The allowance can be backdated for up to 4 tax years, which could result in a refund of up to £1,180. The transfer continues automatically each year unless you cancel it or your circumstances change. For civil partners and married couples, this is one of the simplest tax breaks to claim.

Coordinating Allowances

The most tax-efficient order for using allowances is: first, use your full ISA allowance (£20,000) — it shelters income and gains from both Income Tax and CGT. Second, maximise pension contributions up to the £60,000 annual allowance — you get upfront tax relief at your marginal rate. Third, use your CGT allowance (£3,000) by realising gains each year — "bed and ISA" to crystallise gains within the allowance. Fourth, use your dividend allowance (£500) and savings allowance (£1,000/£500). Fifth, consider transferring assets to a spouse to use their allowances.

For married couples, inter-spouse transfers are CGT-free and Inheritance Tax-free. This means you can equalise investment income by transferring income-producing assets to the lower-earning partner, making full use of both partners' personal allowance, savings allowance, dividend allowance, and basic-rate bands. Regular tax year-end reviews in February and March allow you to use any remaining allowances before the 5 April deadline.

One often-overlooked strategy is the use of the "bed and spouse" technique — transferring investments from a higher-earning spouse to a lower-earning spouse before realising gains or income. Since inter-spouse transfers are free of CGT and IHT, the lower-earning spouse can then use their own CGT allowance (£3,000), dividend allowance (£500), and basic-rate band (20%, or even 0% if they are below the personal allowance). Over a lifetime of investing, this can save tens of thousands of pounds in tax. Similarly, pension contributions can be made on behalf of a non-earning spouse — you can contribute up to £3,600 gross per year to a spouse's pension (including non-earners) and receive basic-rate tax relief, building retirement savings for both partners while reducing your own taxable income.

Capital Gains Tax Allowance

The Capital Gains Tax annual exempt amount for 2026/27 is £3,000, down from £12,300 in 2022. This means you can realise up to £3,000 in capital gains each tax year without paying any CGT. For basic-rate taxpayers, gains above the allowance are taxed at 10% (18% for residential property) and for higher-rate taxpayers at 20% (24% for residential property). Unlike some allowances, the CGT allowance cannot be carried forward — use it or lose it each year. Married couples and civil partners each have their own £3,000 allowance, giving a combined £6,000 per year.

Tax-gain harvesting is the strategy of realising gains up to the £3,000 allowance each year, then repurchasing the asset (being mindful of the 30-day "bed and breakfasting" rules for shares). This resets the cost base for future gains and uses the allowance before it expires. For investments held outside ISAs, this is particularly valuable. If you have losses, you can offset them against gains, and any unused losses can be carried forward indefinitely. The CGT allowance is now so low that it is easily used by most investors with a portfolio over £50,000 — making ISAs even more important for sheltering growth.

Trading and Property Allowances

The trading allowance lets you earn up to £1,000 from casual self-employment or miscellaneous income without paying tax or registering as self-employed. This is useful for occasional freelance work, side hustles, or small online businesses. If your income is between £1,000 and £2,500, you can choose between deducting actual allowable expenses or using the £1,000 allowance — whichever gives the lower taxable profit. Above £2,500, you must register for Self-Assessment.

The property allowance similarly lets you earn up to £1,000 in rental income tax-free. If you rent out a room in your home, the rent-a-room scheme gives a much higher allowance of £7,500 (£3,750 if you are not living in the property as your main home). The rent-a-room allowance is per person, so a couple sharing a home can earn £15,000 tax-free from a lodger. These allowances are simple and require no registration or filing for amounts within the limits. They are particularly attractive for people dipping into self-employment or property rental on a small scale.

FAQs

What is the total ISA allowance for 2026/27?

The total ISA allowance is £20,000 per person. You can allocate it across Cash ISAs, Stocks and Shares ISAs, Innovative Finance ISAs, and Lifetime ISAs.

Can I carry forward unused tax allowances?

Most allowances cannot be carried forward (ISA, CGT, dividend, savings). Pension annual allowance can be carried forward for up to 3 years. Marriage allowance can be backdated 4 years.

What is the pension annual allowance for 2026/27?

The standard annual allowance is £60,000. It is tapered for high earners (adjusted income over £260,000) down to a minimum of £10,000.

How do I claim the marriage allowance?

Apply online at gov.uk. You need the higher earner's National Insurance number and the lower earner's details. It takes about 5 minutes and can be backdated 4 years.

What is the order of using allowances for tax efficiency?

ISA first (tax-free growth and income), then pension (upfront tax relief), then CGT allowance, then dividend allowance, then savings allowance. Use allowances before 5 April each year.