Time running short to use your 2024/25 personal allowance

Most individuals are entitled to receive a personal allowance. This is the amount that they are able to earn before they pay tax. For 2024/25, the personal allowance is set at £12,570. The allowance is for the tax year only, which runs from 6 April 2024 to 5 April 2025. If you haven’t used your allowance in full by the end of the tax year, it’s lost — you cannot carry it forward to the next year. With the tax year drawing to a close, now is the ideal time to review whether you’re making the most of this valuable allowance.

Why Your Personal Allowance Matters

Your personal allowance is one of the most straightforward tax reliefs available. It means you can earn up to £12,570 without paying any income tax at all. Beyond this threshold, you’ll pay tax at the basic rate of 20% on earnings between £12,571 and £50,270, and at higher rates above that. For anyone with multiple income sources — whether from employment, self-employment, rental income, or savings interest — understanding how your allowance applies across all sources is crucial.

The personal allowance is automatically applied by HMRC when you’re employed and receive a payslip. However, if you’re self-employed, a landlord, or have complex finances, you’re responsible for ensuring you’re claiming the allowance correctly through your Self Assessment tax return.

Are You Making Use of Yours?

Now is the time to check whether you’re actually benefiting from your full allowance. Several situations might mean you’re not:

Multiple jobs or income sources: If you work for more than one employer, each one may have allocated part of your allowance. You could end up paying more tax than necessary if the allocation is uneven. HMRC allows you to reallocate your allowance between employers by contacting them directly, but this must be done within the tax year.

Underutilised allowance: If you’re a high earner or have taken unpaid leave, you may have unused allowance. Unfortunately, this cannot be recovered, but it’s worth understanding for future planning.

Self-employed or rental income: If you’re self-employed, freelance, or let out property, your tax bill is calculated through Self Assessment. Make sure you’re accounting for your personal allowance correctly on your tax return — many people inadvertently miss out on relief they’re entitled to.

Savings and dividend allowances: Be aware that interest and dividend income use your personal allowance first, before the savings allowance (£1,000 for basic rate taxpayers) and dividend allowance (£500 for all taxpayers) apply.

Married Couples and Transferable Allowance

If you’re married or in a civil partnership, and one partner doesn’t use their full allowance whilst the other is a higher earner, there’s a potential solution. The Marriage Allowance scheme allows the unused portion to be transferred to a spouse or civil partner, potentially saving up to £252 per tax year. However, this must be claimed before the tax year ends or within four years of the end of the relevant tax year for backdated claims.

Action Steps Before 5 April 2025

With just weeks remaining in the current tax year, here are steps you should take:

Review your income to date: Add up all income from employment, self-employment, savings interest, and dividends. Where does this fall relative to £12,570?

Check your HMRC tax code: Log into your HMRC online account to verify your tax code is correct. An incorrect code could mean you’re paying more tax than necessary.

Claim Marriage Allowance if eligible: If applicable, register online through HMRC or speak to an accountant about backdating claims from previous years.

Prepare your Self Assessment: If you’re self-employed, ensure your accounts are ready and your tax return will correctly reflect your personal allowance claim.

Plan for 2025/26: Consider whether your circumstances will change and how this might affect your tax position in the new tax year.

Moving Forward

The personal allowance is a valuable entitlement, and in an increasingly complex tax landscape, it’s easy to miss opportunities to use it efficiently. By taking action now, you can ensure you’re not leaving money on the table as the tax year closes.

For tailored advice on your personal allowance, Self Assessment, or any aspect of your tax position, contact Severn Accounting — we’re here to help.