Tax allowances

Your personal allowance is the amount of income you can earn before you pay tax.

It is currently £12,570 per year.

For anything you earn above this personal allowance, you'll pay income tax. The percentage you pay increases as you enter a new tax band as shown in the table below.

If your income is above £100,000, your personal allowance is reduced by £1 for every £2 you earn above £100,000. This is known as 'adjusted net income' and changes the starting point for the tax bands. If you earn £125,000 or more your personal allowance will drop to zero. 

Your personal savings allowance is how much you can make in interest from your savings each year tax-free, depending on what rate of income tax you pay.

Scottish Income Tax rates do not apply to savings income. These are taxed at the standard UK rates.

If you're married or in a civil partnership, the marriage allowance lets the lower earner of the couple transfer £1,260 of their personal allowance to their spouse. The lower earner must normally have an income below their personal allowance of £12,570.

The higher earning spouse, who must be a basic rate tax payer, will then receive a tax credit for the amount of personal allowance transferred to them, which is then deducted from the amount of tax they would usually have to pay.

If you're in Scotland you can claim marriage allowance if the higher earning spouse's Personal Income Tax rate is starter, basic or intermediate.

If you or your partner were born before 6 April 1935, you might benefit more as a couple by applying for Married Couple’s Allowance instead.

The annual dividend allowance is £500.

A dividend is an amount of money paid by a company to its shareholders. If your dividend payment is above your allowance, you'll pay a tax rate according to your Personal Income Tax band. You do not pay tax on dividends from shares in an ISA.

Scottish Income Tax rates do not apply to dividend income. These are taxed at the standard UK rates.