Get Up to £18,570 Tax-Free from DWP: If you’re living in the UK, you might be surprised to learn that in the 2025/2026 tax year, you could earn up to £18,570 tax-free – all thanks to a combination of government allowances, including those from HMRC and DWP. Whether you’re retired, working part-time, or earning through savings, this opportunity could help you keep more of your income and pay less tax.
Understanding your tax allowances isn’t just for accountants or financial advisors. Everyone – from students to retirees – can benefit by learning how tax-free limits work and how to take advantage of them. Knowing your entitlements and using them wisely could mean the difference between paying unnecessary tax and keeping more of your hard-earned or saved money.
In this easy-to-understand guide, we’ll walk you through how this tax-free amount is calculated, who qualifies, and how to maximise your allowances. From your Personal Allowance to the Starting Rate for Savings and Personal Savings Allowance, understanding these benefits could put more money in your pocket without breaking any tax rules.
Get Up to £18,570 Tax-Free from DWP
| Category | Details |
|---|---|
| Tax-Free Amount | Up to £18,570 |
| Personal Allowance (2025) | £12,570 (Standard) |
| Starting Rate for Savings | Up to £5,000 (if other income < £17,570) |
| Personal Savings Allowance | £1,000 (basic rate); £500 (higher rate); none (additional rate) |
| Eligibility | UK residents; income and tax band based |
| Administered By | HM Revenue & Customs (HMRC), supported by Department for Work and Pensions (DWP) |
| More Info | GOV.UK Income Tax Allowances |
Getting up to £18,570 tax-free in 2025 is not only possible, but a smart financial strategy for millions across the UK. By understanding how the Personal Allowance, Starting Rate for Savings, and Personal Savings Allowance work together, you can hold onto more of your income and savings returns.
It’s especially important for retirees, part-time workers, and savers to assess their earnings and take full advantage of these thresholds. With a bit of planning and awareness, you can reduce your tax bill legally and efficiently.
£18,570 Tax-Free Opportunity
Let’s break down how this works. You don’t need a special application or benefits claim to access this tax-free income – it’s part of the standard UK Income Tax system.
Here’s how the numbers stack up:
- £12,570 Personal Allowance: The amount you can earn before paying any income tax.
- £5,000 Starting Rate for Savings: If your income (excluding savings) is below £17,570, you may get up to £5,000 of interest tax-free.
- £1,000 Personal Savings Allowance: If you’re a basic rate taxpayer (20%), you get another £1,000 of savings interest tax-free.
That’s potentially £18,570 you can earn in a year without paying a penny in income tax. It’s an opportunity particularly helpful for people on lower or fixed incomes, including pensioners, students, and part-time workers with modest savings.
Who Can Get the Full £18,570 Tax-Free in 2025?
This opportunity is open to UK residents who:
- Have total income (salary, pensions, etc.) under £17,570
- Earn interest from savings
- Are not additional rate taxpayers
Let’s say you have a part-time job and earn £12,570 a year. You also have savings earning £6,000 in interest:
- £12,570: Covered by your Personal Allowance
- £5,000: Covered by Starting Rate for Savings
- £1,000: Covered by Personal Savings Allowance
In this example, you’d pay no tax on £18,570 of income and interest. If you fall outside the full allowance range, you can still benefit from at least one or two of these reliefs.
Personal Allowance Explained
The Personal Allowance is the amount of income you can earn before paying any income tax. For the 2025/26 tax year, this is £12,570. It’s a universal benefit that applies automatically and covers most kinds of earnings.
This applies to:
- Salary and wages
- State pensions
- Private pensions
- Self-employment income
- Casual income such as freelance work or odd jobs
If you earn less than £12,570 in total, you won’t pay any income tax. If you’re retired, your state pension and any private pensions are counted toward this amount.
Note: This allowance starts to reduce if your income exceeds £100,000 – for every £2 earned above this threshold, £1 of allowance is lost.
More info: GOV.UK – Income Tax
What Is the Starting Rate for Savings?
This rate gives you up to £5,000 of savings interest tax-free, only if your other income is below £17,570.
It works on a sliding scale:
- If your non-savings income is £12,570, you qualify for the full £5,000 starting savings allowance.
- If your non-savings income is £15,000, you get only £2,570 of this allowance.
- If your income is above £17,570, this allowance disappears completely.
It’s designed to help low-income savers – like part-time workers, students, or pensioners – keep more of the money they earn from interest.
More info: GOV.UK – Tax on Savings Interest
Personal Savings Allowance
On top of the Personal and Starting Rate allowances, UK taxpayers also benefit from the Personal Savings Allowance (PSA):
- Basic rate (20%) taxpayers: £1,000 tax-free savings interest
- Higher rate (40%) taxpayers: £500 tax-free interest
- Additional rate (45%) taxpayers: No allowance
Even if you don’t qualify for the starting rate, the PSA still gives many taxpayers a chance to earn interest tax-free. It applies to:
- Interest from bank savings accounts
- Building society interest
- Corporate bonds and certain unit trusts
Putting It All Together: Real-Life Examples
Example 1: Retired Person with Savings
- State pension: £9,000/year
- Savings interest: £7,000/year
Outcome:
- £9,000 pension is tax-free (under Personal Allowance)
- £5,000 savings interest tax-free (Starting Rate)
- £1,000 tax-free (Personal Savings Allowance)
- Total tax-free: £15,000
Example 2: Part-Time Worker with Modest Income
- Part-time job: £12,000
- Bank interest: £4,500
Outcome:
- £12,000 covered by Personal Allowance
- £4,500 covered by full Starting Rate and Savings Allowance
- Total tax-free: £16,500
Example 3: Full Allowance Use
- Employment income: £12,570
- Savings interest: £6,000
Outcome:
- £12,570 income = Personal Allowance
- £5,000 interest = Starting Rate for Savings
- £1,000 interest = Personal Savings Allowance
- Total tax-free: £18,570
Get Up to £18,570 Tax-Free from DWP Check If You Qualify
Use these steps to estimate your eligibility:
- Calculate Total Income: Add all income sources,
- Employment wages
- Self-employed earnings
- State and private pensions
- Rental income
- Any DWP payments (some are taxable)
- Calculate Savings Interest: Include,
- Bank account interest
- Fixed savings accounts
- National Savings and Investments (NS&I) products
- Bonds and savings certificates (if taxable)
- Use HMRC Tools: Access your Personal Tax Account to view and track your income, allowances, and tax codes. You can also update your estimated income and see your real-time tax position.
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Ways to Maximise Your Tax-Free Allowances
- Open a Cash ISA: Interest earned is always tax-free and doesn’t count towards your PSA or Starting Rate.
- Use Joint Accounts: Couples can split savings to stay within individual allowances.
- Keep Other Income Low: If feasible, deferring pension income or bonuses could help preserve the starting rate.
- Tax-Efficient Investments: Use NS&I Premium Bonds or tax-efficient savings products to shield returns.
- Reinvest Wisely: Compound interest in tax-free wrappers like ISAs can build wealth long-term.
FAQs
1. Is this a benefit from DWP?
No. This isn’t a direct DWP benefit. It’s a combination of tax allowances managed by HMRC, although it may apply to income from DWP such as state pensions.
2. Do I need to apply for the tax-free allowances?
No. These allowances are usually applied automatically via PAYE or Self-Assessment, but you should check your tax code and submit a tax return if necessary.
3. Can I get more than £18,570 tax-free?
Yes. You might qualify for additional allowances like:
- Blind Person’s Allowance
- Marriage Allowance
- Dividend Allowance
- Tax-free ISAs
4. What if my income exceeds £17,570?
You’ll lose the Starting Rate for Savings but may still benefit from the Personal Savings Allowance and ISAs.
5. Do I need to report savings interest?
Yes, especially if it exceeds your allowance. Banks report interest to HMRC, but self-employed and higher-rate taxpayers must include it on their tax return.
