How much can I earn before paying tax in the UK

The quick answer for the 2026/27 tax year

For most people in the UK, the main amount you can earn before paying Income Tax is £12,570 in the 2026/27 tax year. This is called the Personal Allowance. It normally applies to your total taxable income across the tax year, which runs from 6 April to 5 April.

That means that if your taxable income is £12,570 or less, you will usually pay no Income Tax. If you earn more than £12,570, you usually pay tax only on the amount above that allowance. For example, if you earn £20,000 in employment income and you are entitled to the full Personal Allowance, the first £12,570 is tax-free and the remaining £7,430 is taxable.

However, the full answer depends on the type of income you receive. Wages, self-employed profits, savings interest, dividends, property income and pension income can all be treated differently. There are also separate rules for National Insurance, VAT, trading allowance, dividend allowance and Scottish Income Tax bands. So while £12,570 is the headline answer, it is not the only threshold that matters.

This guide explains how much you can earn before paying tax in the UK, how the rules apply if you are employed or self-employed, when a side hustle becomes taxable, and how tools such as Invoice24 can help you keep accurate records as your income grows.

What is the Personal Allowance?

The Personal Allowance is the amount of income most people can receive each tax year before paying Income Tax. For the 2026/27 tax year, the standard Personal Allowance is £12,570.

This allowance is not limited to one job or one income source. It applies to your total taxable income. If you have a salary, freelance income, rental profits and pension income, those amounts are normally added together when working out how much of your Personal Allowance has been used.

For many employees, the Personal Allowance is handled automatically through PAYE. Your employer uses your tax code to work out how much tax to deduct from your wages before you are paid. The common tax code 1257L usually means you are receiving the standard £12,570 Personal Allowance, although your own tax code may be different if you receive benefits, owe tax from an earlier year or have more than one job.

For self-employed people, the allowance is usually dealt with through Self Assessment. You report your income and expenses, HMRC calculates your taxable profit, and your Personal Allowance is applied as part of the tax calculation.

How much can you earn from employment before paying tax?

If you are employed and have no other taxable income, you can usually earn up to £12,570 in the tax year before paying Income Tax. Once your earnings go above that level, Income Tax is charged on the amount over the allowance.

For employees in England, Wales and Northern Ireland, the 2026/27 Income Tax bands are generally structured as follows. The first £12,570 is covered by the Personal Allowance. The next slice of taxable income is taxed at the basic rate. Higher income is taxed at higher rates once it crosses the relevant thresholds.

As a simple example, suppose you earn £25,000 from one job during the 2026/27 tax year and you receive the full Personal Allowance. You would not pay Income Tax on the first £12,570. You would pay basic rate Income Tax on the remaining £12,430.

It is important to remember that tax is usually calculated across the whole tax year, not simply month by month. If you start a job part-way through the tax year, your first few payslips might look unusual because your payroll system may be catching up with your unused allowance. Similarly, if you change jobs, have a gap between jobs or hold more than one job at once, your tax code can affect how much is deducted in each pay period.

How much can you earn if you are self-employed before paying tax?

If you are self-employed, the key figure for Income Tax is usually your profit, not your total sales. Profit means your business income after allowable business expenses have been deducted.

For example, if you invoice clients for £18,000 in a tax year and you have £3,000 of allowable expenses, your profit is £15,000. If you are entitled to the full Personal Allowance of £12,570 and have no other income, only £2,430 of that profit would be subject to Income Tax.

This distinction is important. Many new freelancers and sole traders worry as soon as their invoices go above £12,570, but Income Tax is normally based on taxable profit. Your sales matter, but your expenses matter too.

Common allowable expenses for a self-employed person may include costs such as business software, office supplies, professional subscriptions, advertising, website costs, accountancy fees, business phone costs, travel for business purposes and certain home office costs. The exact treatment depends on the expense and how it is used, so it is important to keep clear records.

Invoice24 can help here because it gives you a simple way to create invoices, track what you have billed, monitor payments and keep client details organised. When your records are tidy throughout the year, it is much easier to see whether your business is approaching the point where tax, National Insurance or VAT may become relevant.

What is the £1,000 trading allowance?

The trading allowance is a separate tax-free allowance of up to £1,000 for trading, casual or miscellaneous income. It is especially relevant for people with a small side hustle, occasional freelance work or low-level self-employed income.

If your total trading income before expenses is £1,000 or less in a tax year, you may not need to pay tax on it or report it to HMRC. This can apply to small activities such as occasional online selling, a few freelance jobs, tutoring, small craft sales or casual services.

The important point is that the trading allowance looks at gross income, not profit. If you receive £950 from a side hustle and have £200 of costs, your gross income is still £950, which is within the allowance. If you receive £1,200 and have £400 of costs, your gross income is above the £1,000 trading allowance, even though your profit is only £800.

If your trading income is more than £1,000, you generally need to work out your taxable profit. You may be able to deduct either your actual allowable expenses or the £1,000 trading allowance, but not both for the same trade. The better option depends on your costs. If your expenses are low, using the trading allowance may be simpler. If your expenses are high, claiming actual expenses may reduce your taxable profit more effectively.

Can you earn £1,000 from a side hustle tax-free on top of your salary?

In many cases, yes. If you have a job and a small side hustle, the £1,000 trading allowance may mean that a small amount of side income does not create an Income Tax bill. This is separate from your employment income and separate from the Personal Allowance.

For example, if you earn £30,000 from employment and also receive £800 from occasional freelance design work, that £800 may be covered by the trading allowance. Your salary is still taxed through PAYE in the usual way, but the small freelance income may not need to be taxed or reported if it falls within the allowance and you meet the conditions.

If your side hustle grows above £1,000 of gross income, you should pay closer attention. At that point, you may need to register for Self Assessment and report the income, even if your actual profit is modest. This is where using an invoice app such as Invoice24 becomes useful. By creating invoices for each client and keeping a clear record of paid and unpaid work, you can quickly see when your side income has moved beyond hobby level.

Income Tax bands in England, Wales and Northern Ireland

For taxpayers in England, Wales and Northern Ireland, the standard 2026/27 Income Tax structure starts with the £12,570 Personal Allowance. After that, taxable income is charged in bands.

The basic rate band applies to taxable income above the Personal Allowance up to the higher rate threshold. The higher rate applies to the next slice of income, and the additional rate applies to income above the additional rate threshold.

Income Tax is progressive. This means you do not pay the higher rate on all your income as soon as you cross a threshold. You pay each rate only on the part of your income that falls within that band. For example, someone earning slightly above the higher rate threshold does not suddenly lose 40% of their entire salary. Only the relevant slice above the threshold is taxed at the higher rate.

This matters for freelancers and small business owners because growing your income should not usually be viewed as “not worth it” simply because you move into a new tax band. You may pay more tax on the extra income, but you generally still keep a portion of every additional pound of profit.

Scottish Income Tax is different

If you live in Scotland, the tax bands and rates for employment income, self-employed profits, pension income and property income can differ from those used in England, Wales and Northern Ireland. Scotland has its own Income Tax bands for non-savings and non-dividend income.

The UK-wide Personal Allowance still applies in the same general way, but the Scottish bands can mean that the amount of tax you pay above the allowance differs. For the 2026/27 tax year, Scotland uses several bands, including starter, basic, intermediate, higher, advanced and top rates.

This is especially relevant if you are comparing your take-home pay with someone elsewhere in the UK. Two people earning the same salary may have different Income Tax bills if one is a Scottish taxpayer and the other is not.

However, the basic question “how much can I earn before paying Income Tax?” still normally begins with the same standard Personal Allowance of £12,570, assuming you are entitled to the full allowance.

What happens if you earn over £100,000?

The Personal Allowance is reduced if your income goes over £100,000. It is reduced by £1 for every £2 of income above that level. This means that once income reaches £125,140, the standard Personal Allowance is usually reduced to zero.

This creates a particularly high effective tax rate on income between £100,000 and £125,140, because you are paying tax on your income while also losing part of your tax-free allowance. This can affect employees, company directors, consultants and sole traders with higher profits.

If your income is near this range, it is worth planning carefully. Pension contributions, charitable donations and the timing of income can sometimes affect adjusted net income, but the rules can be detailed. A professional accountant or tax adviser can help you understand your options.

Do you pay National Insurance before you pay Income Tax?

National Insurance is separate from Income Tax. You might hear people refer to both together as “tax”, but they are calculated under different rules.

Employees pay Class 1 National Insurance through payroll if their earnings are above the relevant threshold. The main employee National Insurance threshold is similar to the Personal Allowance level, but the calculation is not identical because National Insurance is usually worked out per pay period rather than across the entire tax year in exactly the same way as Income Tax.

Self-employed people may pay Class 4 National Insurance on profits above the relevant lower profits limit. For 2026/27, Class 4 National Insurance applies to self-employed profits above £12,570, with a main rate on profits up to the upper profits limit and a lower rate above that.

So if you are self-employed and your profits are under £12,570, you will usually not pay Income Tax and you will usually not pay Class 4 National Insurance. But if your profits are above £12,570, you may start paying both Income Tax and Class 4 National Insurance.

How much can a sole trader earn before paying tax?

A sole trader can usually make up to £12,570 of taxable profit before paying Income Tax, assuming they have the full Personal Allowance available and no other income uses it up. If the sole trader has other income, such as employment income, pension income or rental profit, that income may use some or all of the Personal Allowance first.

For example, if you earn £10,000 from a part-time job and make £6,000 profit as a sole trader, your total income is £16,000. Your Personal Allowance covers the first £12,570, leaving £3,430 taxable. In that case, your self-employed profit is not considered in isolation; it is combined with your employment income.

If you have no employment income and your sole trader profit is £10,000, you may be below the Income Tax threshold. But you may still need to keep records, especially if your gross income exceeds the trading allowance or you need to file a Self Assessment tax return.

Using Invoice24 can make this simpler. You can create invoices for clients, record invoice numbers, track payment dates and keep a clear audit trail of your business income. Even before you owe tax, good records can save time and prevent confusion later.

How much can a freelancer earn before paying tax?

Freelancers are usually taxed in the same broad way as other self-employed people. The important figure is taxable profit after allowable expenses. A freelancer with no other income can usually make up to £12,570 of profit before paying Income Tax, assuming they are entitled to the full Personal Allowance.

Freelancers often have irregular income, which can make tax planning harder. One month may be quiet and the next may include several paid invoices. Because tax is calculated across the whole tax year, it helps to monitor your running total rather than judging your tax position from one busy month.

A simple habit is to track every invoice as soon as it is issued and mark it as paid only when the money arrives. Invoice24 is designed for exactly this kind of workflow. It can help freelancers issue professional invoices, manage client details, record due dates and keep payment information in one place.

This is useful because your tax bill is not based on guesswork. The better your records, the easier it is to estimate your income, set aside money for tax and avoid a stressful rush near the Self Assessment deadline.

How much can a limited company director earn before paying tax?

Limited company directors often receive income in more than one form, usually salary and dividends. The tax position can therefore be different from a sole trader or employee.

A director may receive a salary through PAYE, which can use some or all of their Personal Allowance. They may also receive dividends if the company has available profits and declares dividends correctly. Dividends have their own allowance and tax rates, but they still interact with your overall Income Tax bands.

For the 2026/27 tax year, the dividend allowance is £500. This means the first £500 of dividend income may be taxed at 0%, but dividends above that amount can be taxable depending on your Income Tax band.

It is important not to confuse company income with personal income. If your limited company invoices clients for £80,000, that does not automatically mean you personally earned £80,000. The company is a separate legal entity. Your personal tax depends on what you take from the company as salary, dividends, benefits or other payments.

Invoice24 can help limited company owners create and manage customer invoices, but company directors should also keep proper company accounting records and consider professional advice on salary, dividends, Corporation Tax and payroll.

Do you pay tax on savings interest?

Some savings interest can be received tax-free. The amount depends on your other income and tax band. Many people have a Personal Savings Allowance, which allows a certain amount of savings interest to be taxed at 0%.

Basic rate taxpayers usually have a larger Personal Savings Allowance than higher rate taxpayers. Additional rate taxpayers do not usually receive a Personal Savings Allowance. There is also a starting rate for savings that can help people on lower incomes receive more savings interest tax-free.

For someone asking how much they can earn before paying tax, this means that bank interest does not always become taxable immediately. But it still counts as income and can affect your overall position if your savings interest is significant.

Do you pay tax on dividends?

Dividends have their own rules. For 2026/27, the dividend allowance is £500. Dividend income above that allowance may be taxed at dividend tax rates, depending on which Income Tax band it falls into.

Dividends are common for limited company directors and investors. They are not the same as wages, and they are not subject to employee National Insurance in the same way as salary. However, they can still create a personal tax bill.

If you run a limited company, it is important to prepare proper invoices, keep business records, understand company profit and only declare dividends correctly. Invoice24 can help with the invoicing side of that process by making it easy to produce clear invoices for your customers and maintain organised sales records.

Do you pay tax on rental income?

Rental income can be taxable, but the taxable amount is usually the profit after allowable expenses and relevant property income rules. There is also a separate £1,000 property allowance for some small amounts of property income.

If you rent out property, a room, storage space or land, do not assume the same rules apply as employment income or self-employment. Property income has its own tax treatment, and mortgage interest relief rules can be especially important for landlords.

If you only receive a small amount of property income, the property allowance may help. If your property income is larger, you may need to report it through Self Assessment and pay tax on the taxable profit.

When do you need to register for Self Assessment?

You may need to register for Self Assessment if you are self-employed as a sole trader and earn more than the trading allowance, if you are a partner in a business partnership, if you receive untaxed income, if you have significant dividend or savings income, or if your tax affairs cannot be fully dealt with through PAYE.

The usual deadline to tell HMRC that you need to complete a tax return is 5 October after the end of the tax year. For example, for income earned in the tax year ending 5 April 2027, the registration deadline would usually be 5 October 2027.

The online Self Assessment filing and payment deadline is usually 31 January after the end of the tax year. It is sensible not to leave everything until January. If you keep invoices and records updated throughout the year, completing your return becomes much easier.

Invoice24 can support this by helping you maintain a clear list of invoices issued, amounts billed and payments received. That information can then be used when preparing your accounts or sharing records with an accountant.

How much can you earn before registering for VAT?

VAT is different from Income Tax. You do not register for VAT simply because you go over the £12,570 Personal Allowance. VAT is based on taxable turnover, not profit.

The VAT registration threshold is £90,000 of taxable turnover over a rolling 12-month period. This is not the same as a tax year, and it is not based on profit. It is a rolling test, so you need to keep an eye on your turnover each month if your business is growing.

For example, if you invoice £92,000 of VAT-taxable sales over the last 12 months, you may need to register for VAT even if your profit is much lower after expenses. Conversely, if your profit is high but your taxable turnover is below the VAT threshold, compulsory VAT registration may not apply, although voluntary registration may still be an option in some cases.

This is another reason to use proper invoicing software. Invoice24 helps you keep track of invoices and sales, which can make it easier to monitor whether your business is getting close to the VAT threshold.

Does the tax-free amount apply to income or profit?

For employees, the relevant figure is normally pay or earnings. For self-employed people, the relevant figure for Income Tax is usually profit after allowable expenses. For VAT, the relevant figure is turnover. For the trading allowance, the relevant figure is gross trading income. These distinctions are easy to mix up, but they matter.

Here is a practical example. Imagine you are a freelance photographer. During the tax year, you invoice clients for £20,000. You spend £5,000 on allowable business expenses. Your business profit is £15,000. If you have no other income and receive the full Personal Allowance, you may pay Income Tax on £2,430, because £15,000 minus £12,570 leaves £2,430 taxable.

However, your gross income is £20,000, so you are well above the £1,000 trading allowance. You would not be able to treat the entire activity as tax-free just because some of the profit falls within your Personal Allowance.

What records should you keep before you pay tax?

Even if you are below the tax threshold, it is still wise to keep proper records. A small side project can grow quickly, and it is much easier to stay organised from the beginning than to reconstruct your income later.

You should keep records of invoices issued, payments received, business expenses, receipts, bank transactions, client details and any refunds or cancellations. If you are self-employed, you should also keep enough information to explain how you calculated your profit.

Invoice24 is useful because it gives you a straightforward way to produce professional invoices and keep your billing records consistent. Instead of relying on scattered documents, messages or spreadsheets, you can create invoices with the key details your clients expect, including invoice numbers, dates, payment terms, item descriptions and totals.

Good invoicing also helps you get paid faster. Clear invoices reduce confusion, show clients exactly what they are paying for and give you a record to follow up if a payment becomes overdue.

What should you put on an invoice?

A proper invoice should usually include your business name, client name, invoice number, invoice date, a description of the goods or services, the amount charged, payment terms and your payment details. If you are VAT registered, you may also need to include VAT-specific information such as your VAT number, VAT rate and VAT amount.

Invoice24 is built to make this process simple. Whether you are a freelancer, contractor, sole trader or small business owner, you can create clear invoices without needing to design a template from scratch. This is especially helpful when you are just starting out and want to look professional from your first client.

Using consistent invoice numbers is also important. It helps you track your income, match payments to invoices and identify missing payments. When tax time comes, your invoice records can help you calculate your turnover and check whether your figures are complete.

Examples of how much you can earn before paying tax

Consider an employee earning £12,000 a year from one job with no other taxable income. If they receive the full Personal Allowance, they would usually pay no Income Tax because their income is below £12,570.

Now consider an employee earning £18,000 a year. The first £12,570 is covered by the Personal Allowance, and the remaining £5,430 is taxable. The tax would usually be collected through PAYE.

Next, consider a sole trader with £14,000 of sales and £4,000 of allowable expenses. Their profit is £10,000. If they have no other taxable income and receive the full Personal Allowance, they would usually pay no Income Tax because their profit is below £12,570.

Now consider a freelancer with £30,000 of sales and £6,000 of allowable expenses. Their profit is £24,000. If they have no other income and receive the full Personal Allowance, £11,430 of profit would be taxable.

Finally, consider someone with a full-time job earning £35,000 and a side hustle that brings in £5,000 of profit. Their employment income may already use their full Personal Allowance, so the side hustle profit is likely to be taxable. They may also need to register for Self Assessment and report the side income.

Common mistakes people make with tax thresholds

One common mistake is assuming that the £12,570 Personal Allowance applies separately to each job or each income stream. It does not. It normally applies to your total taxable income.

Another mistake is confusing turnover with profit. A sole trader might invoice £25,000 but have £8,000 of allowable expenses, leaving £17,000 profit. Income Tax is generally based on the profit, not the full £25,000. But for VAT, the turnover figure is what matters.

A third mistake is ignoring small side hustle income. Even modest income can create reporting obligations if it goes above the trading allowance. Keeping invoices from the beginning avoids uncertainty later.

A fourth mistake is forgetting about National Insurance. Someone may correctly estimate their Income Tax but forget that self-employed profits above the relevant threshold can also attract Class 4 National Insurance.

A fifth mistake is leaving records until the end of the tax year. This often leads to missing invoices, forgotten expenses and rushed calculations. Using Invoice24 throughout the year helps keep income records organised as you go.

How Invoice24 helps you manage income before tax becomes stressful

When you are asking how much you can earn before paying tax, you are really asking how to stay in control of your income. Invoice24 can help by giving you a free invoice app that supports the practical side of running a small business, freelance service or side hustle.

With Invoice24, you can create professional invoices, organise client information, track invoice details and keep a clearer record of your business income. This matters whether you are below the tax threshold, close to it or already earning enough to file a tax return.

If you are below the £1,000 trading allowance, invoice records can help confirm that your income stayed within the limit. If you are above that level, they can help you work out your sales for Self Assessment. If your business is growing toward the VAT threshold, they can help you monitor turnover. If you work with repeat clients, they can help you keep billing consistent and professional.

Good invoicing is not just about tax. It also improves cash flow. Clear invoices tell clients what they owe, when they need to pay and how to pay. That can reduce delays and make your business look more reliable.

So, how much can you earn before paying tax in the UK?

For most people, the answer is that you can earn up to £12,570 before paying Income Tax in the 2026/27 tax year, provided you are entitled to the full Personal Allowance and have no other taxable income using it up.

If you have a small side hustle, you may also be able to receive up to £1,000 of gross trading income under the trading allowance. If you are self-employed, Income Tax is usually based on profit after allowable expenses, not just the total amount you invoice. If you receive dividends, savings interest or property income, separate allowances and rules may apply. If your business turnover grows, the VAT threshold is a separate issue and is much higher than the Income Tax allowance.

The safest approach is to track your income from the start. Whether you are freelancing occasionally, building a side hustle, working as a sole trader or running a small company, clear invoices and accurate records make it easier to understand where you stand.

Invoice24 gives you a free and simple way to create invoices and manage your billing, helping you stay organised before tax becomes complicated. When you know what you have earned, what has been paid and what is still outstanding, it becomes much easier to plan for tax, avoid surprises and grow your business with confidence.