Allowances
What is the Personal Allowance?
The £12,570 you can earn before income tax kicks in, and the £100k taper that takes it away.
This is the UK Tax Drag FAQ hub — 49 of the most-asked UK tax and money questions answered with current 2026/27 figures. Each card links to a deeper page where the math is shown step-by-step. If your question isn't here, use the search at the top of the page or check our tax glossary.
Reviewed against HMRC, DWP and FCA published guidance. No affiliate links. No paid placements. See our methodology.
Income tax, PAYE and tax codes
Thresholds
What is adjusted net income?
The hidden number that drives HICBC, the £100k taper and Tax-Free Childcare.
Marginal rate
What's my marginal tax rate?
The rate on your next £1 of income — usually higher than the average rate you actually feel.
Tax codes
What is a UK tax code?
How HMRC tells your employer how much tax-free pay you get. The 4 digits + letter explained.
Emergency tax
What is an emergency tax code?
When you see W1, M1 or X next to your tax code, and how to fix it.
National Insurance
What is National Insurance?
The second tax most workers pay — rates, thresholds and what it buys you.
Threshold traps and high earners
60% trap
What is the 60% tax trap?
The effective rate between £100k and £125,140 when the Personal Allowance tapers away.
Escape
How do I escape the 60% trap?
How much pension contribution gets you back below £100k adjusted net income.
Bonus
Do I pay tax on overtime and bonuses?
Yes — but the question is which band the extra lands in.
Fiscal drag
How much have frozen thresholds cost me?
Our annual tracker showing what an average UK worker has lost since 2021/22.
Pensions and tax relief
Tax relief
What is pension tax relief?
The gross-up that turns £80 into £100 in your pension — and how higher-rate payers reclaim more.
Annual allowance
What is the pension annual allowance?
The £60,000 yearly cap on pension contributions that get tax relief.
Auto-enrolment
What is auto-enrolment?
The default workplace pension you got opted into — minimum 8% combined.
Tax-free cash
What is the Lump Sum Allowance?
The new £268,275 cap on the 25% tax-free pension cash from April 2024.
Salary sacrifice
Is salary sacrifice worth it?
Yes for most basic and higher-rate payers — it saves NI as well as income tax.
Higher-rate
How do I claim higher-rate pension relief?
You don't get it automatically with personal pensions — you reclaim via Self Assessment.
ISAs and tax-free wrappers
Allowance
What's the ISA allowance for 2026/27?
£20,000 across stocks, cash, innovative-finance and (subject to age) Lifetime ISAs.
ISA vs GIA
Is an ISA worth it vs a GIA?
Run our calculator over your horizon — for most investors above £500 dividend allowance, yes.
LISA
How does the Lifetime ISA work?
25% government bonus up to £1,000/year. First home up to £450k or age 60+.
JISA
What's a Junior ISA?
£9,000/year tax-free for under-18s, controlled by parents until age 16.
PSA
What's the Personal Savings Allowance?
£1,000 of interest tax-free (basic rate), £500 (higher rate), £0 (additional rate).
Capital gains, dividends and investments
CGT allowance
What's the CGT allowance?
£3,000 per person in 2026/27 — cut from £12,300 over three years.
CGT rates
What are the CGT rates?
18% in your unused basic-rate band, 24% above — the same rates for shares and property.
Dividends
What's the dividend allowance?
£500 of dividend income tax-free in 2026/27. Above that, 10.75/35.75/39.35%.
Bed and ISA
What's "bed and ISA"?
Selling outside an ISA and rebuying inside it — legal way to crystallise gains.
Crypto
Is crypto subject to CGT?
Yes for most UK individuals. Crypto-to-crypto swaps count too.
Self-employed, freelancers and Ltd companies
Filing
Do I need to file Self Assessment?
Income over £150,000, side income above £1,000 trading or £1,000 property, plus the HMRC tool.
Trading allowance
What is the trading allowance?
£1,000 of side income tax-free — from gig work, hobby sales or content.
Director split
Salary or dividends as a director?
Usually a small salary + dividends — our calculator runs the math for your profit level.
VAT threshold
When do I register for VAT?
When taxable turnover passes £90,000 in any rolling 12 months. You can register voluntarily earlier.
R&D
Can my company claim R&D tax credits?
Maybe — SME rules tightened from April 2024. Check whether your work meets the qualifying tests.
Family, benefits and life events
HICBC
How does HICBC actually work?
1% charge per £200 of adjusted net income above £60,000, fully clawed back at £80,000.
Marriage Allowance
How does Marriage Allowance work?
Transfer 10% of unused PA — worth up to £252/year if eligible.
Childcare
What is Tax-Free Childcare?
20% government top-up on childcare costs — cuts off at £100k adjusted net income.
Maternity pay
How does Statutory Maternity Pay work?
90% of pay for 6 weeks, then the SMP rate or 90% (whichever lower) for 33 weeks.
Redundancy
Is redundancy pay taxed?
First £30,000 is tax-free; statutory redundancy is included in that limit.
State pension and NI credits
Forecast
How much State Pension will I get?
Up to £241.30/week in 2026/27 if you have 35 qualifying years. Less than 10 = nothing.
Triple lock
What is the triple lock?
The annual uprating rule — highest of CPI, earnings growth, or 2.5%.
Class 3
Should I buy NI top-ups?
£956.80 buys an extra £342/year of pension — payback in ~2.7 years.
Auto-credits
When do I get NI credits without paying?
Carer, Child Benefit claimant, jobseeker, sick, or in receipt of certain benefits.
Frozen years
What if I have gap years before 2006?
The special 2006-2018 buying window closed in April 2025 — only standard 6-year window now.
Property, mortgages and SDLT
SDLT
How much stamp duty will I pay?
Bands start at £125,000 in England/NI; first-time buyers get 0% to £300k.
Second home
Why is SDLT higher on a second home?
5% surcharge on the whole price if you (or your spouse) already own residential property.
BTL tax
How does Section 24 affect landlords?
Mortgage interest gives only a 20% tax credit, not full deduction — pushes many into higher-rate.
CGT on property
When is CGT due on a property sale?
Within 60 days of completion for UK residential property gains.
Rent a Room
What's the Rent a Room scheme?
£7,500 of rental income tax-free if you let a furnished room in your main home.
Inheritance tax and wealth transfer
NRB
What's the IHT nil-rate band?
£325,000 per person, frozen until April 2030. Spouse transfers unused portion.
RNRB
What's the residence nil-rate band?
Extra £175,000 if your home passes to direct descendants — tapers above £2m estates.
Gifts
When are gifts inheritance-tax free?
The 7-year rule, the £3,000 annual exemption, and the ""card">
Couples
How much can a couple pass IHT-free?
Up to £1m where the home passes to children — using both NRB + RNRB on each death.
Other common questions
Savings tax
Do I pay tax on savings interest?
Above the starting rate band, the PSA covers basic and some higher-rate payers; the rest is taxed at marginal rate.
Company car
How does company car tax work?
BIK percentage × list price × your marginal rate. EVs are highly tax-efficient until 2028.
P11D
What is a P11D?
The form that reports benefits-in-kind your employer gave you — affects your tax code.
Benefits-in-kind
What is a benefit in kind?
Non-cash compensation taxed via your code. Common: medical insurance, car, gym, accommodation.
Tax code BR
Why is my tax code BR?
BR means 20% basic-rate on all of this income — usually a second job or pension with no PA.
0T code
Why is my tax code 0T?
Zero allowance applied — you've used up your PA somewhere else, or new starter without P45 info.
Can't find your question?
Three places to look next:
- All 53 calculators — for any specific number you need to work out.
- The tax glossary — for jargon you've spotted but don't recognise.
- Worked examples library — 40+ step-by-step calculations across 19 topics.
Or email editor@uktaxdrag.co.uk — if it's a question we should have on the site, we'll add it.
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