The amount you can earn tax-free will increase from today (6 April), as it's the start of the 2021-22 tax year.
However, the 'pay rise' may be short-lived, as many allowances will be frozen until 2026, meaning thousands of people will likely be tipped into a higher tax band as their wage increases outpace tax threshold increases.
Here, Which? reveals how to use all of the tax-free allowances to your advantage, from reducing what you pay on savings interest to making the most of your property.
Each year, you're given an allowance for certain taxes where you only have to pay tax if you exceed that allowance. This counts for various sources of income, including what you earn from your job or pension, along with your savings, dividends and profits made after selling a valuable item.
Each kind of income has its own tax and its own allowance, which can vary depending on the income tax band you fall into. But, fear not, it's not as complicated as it sounds.
Click on the links below to find out more about each kind of tax:
In addition to this, if you buy, rent or sell the things you own, you could qualify for several other allowances:
The personal allowance is the amount you can earn from your salary - whether you're employed or self-employed - before having to pay income tax.
For 2021-22, this is increasing from £12,500 to £12,570. The graph below shows how the personal allowance has changed over the past few years.
If you earn more than the personal allowance, you'll have to pay income tax.
If you live in England, Northern Ireland or Wales, your earnings will fall into these three tax bands:
You'll start to lose your personal allowance once you earn more than £100,000 - regardless of where you live in the UK. For every £2 you earn over £100,000, you'll lose £1 of the personal allowance, meaning that by the time you earn £125,140 you'll have no personal allowance at all and will be taxed on your whole income.
Employees pay Class 1 NICs, charged at 12% when you earn between £9,568 and £50,270. In 2020-21, these were payable on earnings between £9,500 and £50,000. You'll pay 2% on earnings above £50,270.
may need to pay Class 2 and possibly Class 4 NICs on their profits. Class 2 is a payment of £3.05 a week (unchanged from 2020-21), on profits between £6,515 and £9,568. You'll pay Class 4 NICs of 9% on profits between £9,568 and £50,270, and 2% on profits more than this - in addition to Class 2.
The tax-free amount you can earn from dividends in 2021-22 is sticking at £2,000, where it's been for several years.
You might earn dividends as part of your income if you have invested in company shares, but you'll only be taxed if you earn more than £2,000 in the same tax year - and the tax rates are different to other income.
The rate you're taxed depends on your income tax band:
Ahead of the Budget, there were lots of rumours about possible capital gains tax (CGT) reforms, but instead, everything about the tax was kept the same for 2021-22.
The capital gains allowance refers to the amount of profit you can earn from selling valuable items before having to pay tax on it.
If you own assets jointly with your spouse, you can effectively pool your allowances - so, together, you'd have £24,600 for 2021-22.
If you exceed the allowance, the amount of tax you'll pay depends on your income tax band and what you've sold, as property is taxed at a higher rate than other valuable items.
Basic-rate taxpayers pay 10% on assets and 18% on property, while higher- and additional-rate taxpayers pay 20% on assets and 28% on property.
Any losses can be offset against your gains to reduce your tax bill.
If you're married or part of a civil partnership, you may qualify for the marriage allowance.
This tax break is for couples where one partner earns less than the personal allowance (£12,570 in 2021-22), and the other is a basic-rate taxpayer (earning between £12,571-£50-270 in 2021-22).
By claiming marriage allowance, it essentially means that the lower-earning partner can transfer 10% of their personal allowance to the partner that earns more - effectively boosting their personal allowance to £13,830.
This means the higher earner can keep more of their salary before income tax kicks in, boosting the couple's finances - in real terms, it means earning an extra £252. However, it's also worth bearing in mind that you can also backdate your claim for up to four years, meaning you could get a hefty rebate.
If you earn a small amount from things like selling items on eBay, or making items to sell on Etsy, the £1,000 trading allowance could be useful.
As long as this income remains below £1,000, you won't need to inform HMRC about it - but if you exceed £1,000 you'll need to declare it on a self-assessment tax return.
In a similar theme to the trading allowance, the property allowance means you can earn up to £1,000 from your property without having to report it to HMRC.
This won't cover much of what you'd earn from renting a room - so the Rent-a-room scheme below is a better bet - but it may be useful if you rent out your parking space, for instance, or earn a little from using your house or garden for photoshoots.
The Rent-a-room scheme threshold is remaining at £7,500 for 2021-22, where it's been for several years. This is the amount you can earn tax-free for letting a room in your home.
This only applies to the property you live in; buy-to-let properties are excluded.
If you earn more than this threshold, you must submit a self-assessment tax return and declare the income.
Depending on your income, you may be able to earn up to £6,000 in savings interest before having to pay tax on it.
For each £1 you earn over the £12,570 personal allowance, you'll lose £1 from the £5,000 savings starting rate - so if you earn more than £17,570 you won't have any of it left.
However, the £1,000 personal savings allowance is available for all basic-rate taxpayers (who earn less than £50,270); this reduces to £500 if you pay higher-rate tax (between £50,270 and £150,000). Additional-rate taxpayers don't receive any personal savings allowance.
If the interest you earn on your savings exceeds the personal savings allowance, or you're an additional-rate taxpayer and don't receive this allowance at all, you could cut your tax bill with an Isa.
The Isa allowance for 2021-22 is remaining at £20,000, which is the total amount you can pay into one or a mix of Isas.
All money held within an Isa remains tax-free, including interest.