As of September 2025, the UK offers several valuable tax-free allowances that can significantly reduce your tax burden.
Understanding and maximising these allowances can significantly reduce your tax bill.
Making sure you are understanding and utilising these allowances during the current tax year is crucial for optimising your financial position.
Remember that many of these allowances reset at the end of each tax year (which is April 5th 2026 for the current tax year) so you could miss out if you don’t claim them or use them in the best way possible.
We list below ten valuable tax free allowances to use before the end of the 25/26 tax year:
#1. Personal Allowance – £12,570
The foundation of the UK tax system allows you to earn your first £12,570 completely tax-free. This applies to all income sources including employment, self-employment, pensions, and rental income.
However, be aware that this allowance is gradually reduced if your income exceeds £100,000, disappearing entirely at £125,140.
**Benefit**: Provides a substantial tax-free foundation for all taxpayers.
**Eligibility**: Automatically available to most UK residents, though reduced for high earners.
#2. Savings Allowance – Up to £1,000
This savings allowance lets you earn interest from savings without paying tax. The specific amount depends on your tax band:
– £1,000 for basic rate taxpayers.
– £500 for higher rate taxpayers.
– £0 for additional rate taxpayers.
**Benefit**: Encourages saving by making interest earnings tax-efficient.
**Eligibility**: Available to basic and higher rate taxpayers.
#3. Dividend Allowance – £500
For the 2025/26 tax year, you can receive up to £500 in dividend income tax-free, regardless of your other income.
**Benefit**: Provides tax relief for investors and small business owners who take dividends.
**Eligibility**: Anyone receiving dividends from shares or investments.
#4. Capital Gains Tax Allowance – £3,000
You can make capital gains of up to £3,000 in the 2025/26 tax year without paying Capital Gains Tax.
**Benefit**: Allows for tax-free gains when selling assets that have appreciated in value.
**Eligibility**: Anyone disposing of chargeable assets (excluding your main residence).
#5. Trading Allowance – £1,000
This valuable allowance permits you to earn up to £1,000 from casual work or side hustles completely tax-free, without needing to file a self-assessment tax return.
**Benefit**: Simplifies tax affairs for those with small trading income streams.
**Eligibility**: Anyone with small amounts of trading or miscellaneous income.
#6. Property Income Allowance – £1,000
Similar to the trading allowance, this permits up to £1,000 of income from property (such as renting out a parking space or garage) without tax liability.
**Benefit**: Simplifies tax reporting for small-scale property income.
**Eligibility**: Anyone with small amounts of property income (not applicable with Rent-a-Room relief).
#7. Rent-a-Room Relief – £7,500
If you let out furnished accommodation in your main home, you can earn up to £7,500 tax-free without completing a tax return.
**Benefit**: Substantial tax relief for those letting rooms in their home.
**Eligibility**: Homeowners or tenants (with permission) who rent out furnished rooms in their main residence.
#8. ISA Allowance – £20,000
The Individual Savings Account (ISA) allowance lets you save or invest up to £20,000 in the 2025/26 tax year, with all interest, dividends, and capital gains remaining completely tax-free.
**Benefit**: Provides a tax-efficient wrapper for substantial savings and investments.
**Eligibility**: UK residents aged 18+ (16+ for cash ISAs).
#9. Junior ISA Allowance – £9,000
For children under 18, up to £9,000 can be contributed to a Junior ISA in 2025/26, with all growth remaining tax-free.
**Benefit**: Helps build tax-efficient savings for children’s future.
**Eligibility**: UK resident children under 18 who don’t have a Child Trust Fund.
#10. Marriage Allowance – £1,257
This allows a spouse or civil partner who earns below the personal allowance threshold to transfer 10% of their personal allowance (£1,257) to their partner, reducing their tax bill by up to £251.40 annually.
**Benefit**: Provides a tax reduction for couples where one partner isn’t utilising their full personal allowance.
**Eligibility**: Married couples or civil partners where one earns below the personal allowance and the other is a basic rate taxpayer.
Recent changes when claiming tax rebates
With HMRC’s continued modernisation of the tax system in 2025 which includes the new Digital Reporting Service for workers under PAYE making a tax claim has become more accessible.
Significant changes implemented from 2024 include:
- Mandatory evidence submission for all employment expenses claims.
- Introduction of a new online tax rebate for expenses iForm from 2024.
- Stricter documentation standards for all expense categories.
- Enhanced verification processes for claims.
These changes aim to reduce fraudulent claims but make the process more rigorous for legitimate claimants.
Have the flat rate allowances for uniforms and tools changed?
The flat rate allowances themselves haven’t changed. HMRC states: “We will not require evidence for these Flat Rate Expenses claims. However, customers are still responsible for making sure they are eligible to claim Flat Rate Expenses.”
Are there any new tax relief opportunities I should know about?
Recent additions to tax relief opportunities include:
- Enhanced working from home allowances introduced during the pandemic have now been standardised.
- Additional professional bodies added to HMRC’s approved list for subscription relief.
- New guidance on electric vehicle mileage tax rebate claims for company car users.
Be prepared for future claims
With recent changes making the claims process more stringent, good record-keeping has never been more important.
Start tracking your expenses now, keep appropriate evidence, and remember you can claim for up to four previous tax years if you’ve never claimed before.
