The Money Saving Expert founder has tweeted a new video, discussing personal allowances and income tax bands and brackets, ahead of the new tax year this weekend.
He said: “The first thing to say is, most people get a Personal Allowance.”
What is your tax-free Personal Allowance?
The standard Personal Allowance is £12,570, which is the amount of income you do not have to pay tax on.
But, for every £2 you earn over £100,000, you lose £1 of your tax-free Personal Allowance.
The standard Personal Allowance is £12,570, which is the amount of income you do not have to pay tax on.
There is currently a petition to raise the HMRC income tax personal allowance threshold from £12,570 to £20,000, which has received more than 230,000 signatures and a response from the treasury, although there were no changes in the Spring statement 2025.
The petition to Parliament was started by Alan David Frost, saying: “Raise the income tax personal allowance from £12570 to £20000. We think this would help low earners to get off benefits and allow pensioners a decent income.”
Signatures can still be added here.
The new tax year is about to start. So to help, here’s a beginner’s guide to how income tax works… pic.twitter.com/wu8e0ZyIeI
— Martin Lewis (@MartinSLewis) March 31, 2025
Blind Person’s Allowance
You may be able to earn more before you start paying Income Tax if you claim Blind Person’s Allowance. This tax-free allowance is added to your Personal Allowance.
What do you not pay Income Tax on?
According to HMRC, you not pay tax on things like:
If you only occasionally sell items or rent out property (for example through auction websites or short-term rental apps), check if you need to tell HMRC about this income.
Income Tax rates and bands
The table shows the tax rates you pay in each band if you have a standard Personal Allowance of £12,570.
(Image: HMRC)
“The typical number is £12,570,” says the video. “So if you earn less than that, and that’s total earnings from work and from a pension or interest on your savings, if you earn less than that, it isn’t taxed.
“If you earn more than that, some of it is taxed, and the ‘some of it’ part is crucial. If your allowance is £12,570 pounds, and you earn more, it’s only the bit above that that you pay 20% tax on.”
He added: “All these tax thresholds are England, Wales and Northern Ireland is slightly different in Scotland, but the principle is the same.”
(Image: HMRC Scottish rates)He continued, with an example: “So let’s imagine you earn £13,570 , that’s £1000 above the threshold, you pay 20% tax on £1000 – you pay £200 pounds tax. You don’t pay 20% tax on the entire amount you earned. And that happens every time you go above a threshold. You only pay the increased rate on the amount above the threshold.
“I’ve actually had some people who say to me that just offered me money. I’m going to get a pay rise. It’s going to put me under tax threshold. I should say no, shouldn’t I, because it means I’ll take home less. Incorrect, earn more, you will take home more.”
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The rate above £12,570 is 20% so every pound you take home, you continue to pay that 20% rate until, typically earnings of £50,270 a year. Once you’ve hit that above that, the tax rate is 40%.
He adds: “Then, for every pound you earn, 40 Pence is taken off. You take home 60 pence. But remember, that’s only on above the threshold.
“Now you would think that continues until the tax rate is increased again, which happens at the last tax threshold is £125,000 pounds, but it doesn’t, because something funny happens once you get to £100,000, you start to lose your personal allowance.
“Remember, £12,570 that you can earn tax free? Once you hit £100,000, each pound over you go, you start to lose the personal allowance. And what that effectively means is, from earnings from £100,000 to around £125,000, your effective tax rate is 60% – in other words, for every pound you earn in that threshold, you only take home 40p then finally, we get to the top rate of tax, which is for people generally, who earn over £125,140.”
