My Mate Dave Said... ‘You Don’t Pay Tax on the First £12,570’
“You don’t pay tax on the first £12,570.”
Dave isn’t completely wrong. But, as usual, he’s left out the bit that matters.
The £12,570 personal allowance means that the first £12,570 of your taxable income is usually taxed at 0% , provided you’re entitled to the full allowance. It does not mean you can earn £12,570 tax-free and then ignore everything else. It certainly doesn’t mean your entire income is tax-free if you earn more than that.
For you as a creative freelancer, musician, actor, filmmaker, designer or artist, understanding the difference can prevent a nasty surprise after a busy year of work.
So, what does the personal allowance actually do? And why might you still need to register for Self Assessment even if your income tax bill is nil?
Understanding the personal allowance
The personal allowance is the amount of income most people can receive before paying income tax.
For the 2026–27 tax year, the standard personal allowance is £12,570. The same figure applies for 2027–28.
Think of your income as being placed into separate slices:
The first £12,570 is normally taxed at 0%
The next slice, up to the basic-rate limit, is taxed at 20%
Income above the basic-rate band may be taxed at 40%
The additional-rate slice is taxed at 45%
That’s the part Dave tends to skip.
The allowance is not a magic £12,570 shield covering your whole income. It is simply the first slice. Once your income moves beyond it, the next slice is taxed according to the relevant rate.
You can read the current rates on the official GOV.UK Income Tax rates page.
Seeing how the tax slices work
Imagine you’re a freelance photographer and your taxable self-employed profit for the year is £20,000.
Ignoring National Insurance and assuming you have no other income:
The first £12,570 is taxed at 0%
The remaining £7,430 is taxed at 20%
Your income tax would therefore be £1,486
That’s not 20% of the full £20,000. It’s 20% of the slice above the personal allowance.
Now imagine your taxable profit is £50,000:
The first £12,570 is taxed at 0%
The remaining £37,430 sits within the basic-rate band
That slice is taxed at 20%
Your income tax bill would be higher because more of your income has moved into a taxable slice : not because the personal allowance has disappeared.
This distinction matters when your income is irregular. You might earn very little for several months, then receive a large production fee, touring payment or batch of client invoices. Looking only at individual payments can be misleading. HMRC looks at your taxable income for the tax year as a whole.
Calculating profit : not simply adding up payments
If you’re self-employed, income tax is generally based on your taxable profit, not your total turnover.
Your profit is broadly:
Business income – allowable business expenses = taxable profit
So, if you invoice £30,000 during the year but spend £8,000 on legitimate business costs, your taxable profit may be £22,000.
For a creative business, allowable expenses might include things such as:
Materials, props and art supplies
Camera, lighting, sound or musical equipment
Studio or rehearsal space
Travel to performances, shoots or client meetings
Professional subscriptions and memberships
Website, marketing and promotional costs
Accountancy fees
Business insurance
The rules depend on the expense and how it relates to your work. A cost needs to be incurred wholly and exclusively for the purposes of your business : although some expenses can be apportioned where there’s both business and private use.
Keep clear records and receipts throughout the year. Don’t wait until your Self Assessment deadline to reconstruct an entire year from bank statements and half-remembered notes.
Checking whether other income uses your allowance
The £12,570 personal allowance applies to your total taxable income, rather than being available separately for each income stream.
This is particularly relevant if you combine creative work with other sources of income, such as:
PAYE employment
Freelance commissions
Performance fees
Royalties
Teaching or workshops
Rental income
Pension income
Interest or dividends
For example, you might have a part-time job paying £10,000 and earn a further £8,000 in taxable freelance profit. You don’t receive a fresh £12,570 allowance for each source. HMRC considers your income together and applies the tax bands to the total.
Your employer usually deals with tax on your employment income through PAYE. You’ll normally report your self-employed profit and other relevant income through Self Assessment.
That combination can feel confusing : especially when your creative work changes from one year to the next. We can help you understand how the different parts fit together through our accounting support for creatives and arts professionals.
Remembering that National Insurance is separate
Another part Dave may overlook: income tax and National Insurance are different charges.
The personal allowance applies to income tax. It doesn’t automatically cancel any National Insurance that may be due.
If you’re self-employed, National Insurance is generally calculated separately based on your self-employed profits. The thresholds and rates don’t always match the income tax bands, even when the figures look similar.
So, having no income tax to pay does not always mean you have no tax-related liability at all.
Your Self Assessment calculation may include:
Income tax
Class 4 National Insurance, where applicable
Class 2 National Insurance treatment, depending on the rules and your circumstances
Payments on account towards a future tax bill, where relevant
The exact position depends on your profits, other income and the tax year. Check the relevant GOV.UK National Insurance guidance for self-employed people rather than relying on a pub-table calculation.
Registering even when your tax bill is £0
Here’s the misconception that causes the most trouble:
“If I’m under £12,570, I don’t need to register.”
Not necessarily.
If your gross trading income from self-employment is more than £1,000 in a tax year, you’ll normally need to register for Self Assessment as a sole trader and file a tax return.
That can apply even if your final taxable profit is below £12,570 : and even if your income tax bill works out at zero.
The £1,000 figure is the trading allowance threshold. It is separate from the £12,570 personal allowance.
For example:
You receive £6,000 from freelance illustration work
Your allowable business expenses are £2,000
Your taxable profit is £4,000
You may have no income tax to pay if you have your full personal allowance
But because your gross trading income was more than £1,000, you may still need to register and file
You normally need to tell HMRC by 5 October following the end of the tax year in which you became liable to register.
Online tax returns and payment are generally due by 31 January after the end of the tax year. Late registration or filing can lead to penalties, even where no tax is owed.
You can check the official rules on registering as a sole trader and registering for Self Assessment.
Looking out for a reduced personal allowance
The standard £12,570 allowance is not available in full to everyone.
If your adjusted net income is more than £100,000, your personal allowance is reduced by £1 for every £2 above that threshold. It can reduce to zero once your income reaches £125,140.
This may affect you if your creative business has had an unusually successful year, or if you combine freelance income with employment, royalties or other taxable income.
At that level, the calculation can become more involved. Don’t assume the standard allowance applies without checking.
Other circumstances can affect your tax position too, including:
Marriage Allowance transfers
Benefits in kind from employment
Pension contributions
Dividends
Savings interest
Losses from self-employment
Income from more than one business
A qualified accountant can review the complete picture instead of looking at one number in isolation.
Keeping the right records from the start
Good records make the personal allowance easier to apply correctly because they help establish your actual taxable profit.
Set up a simple routine:
Record every payment when you receive it.
Keep invoices and receipts together.
Separate business and personal spending where possible.
Track expenses by category.
Note whether equipment is used privately as well as professionally.
Review your total income and profit regularly.
Put money aside for any tax and National Insurance that may become due.
Check your registration and filing deadlines.
This is especially useful when you’re working across several projects : a film one month, a live gig the next, then a quiet spell while you develop your own work.
Learning more : without asking Dave
Dave may be brilliant at finding rehearsal spaces, recommending bands or knowing which pub has the best Sunday roast. Tax advice? Check the source.
Start with:
HMRC’s official manuals and helpsheets
A qualified accountant who understands creative businesses
Tax rules can change, and your personal allowance is only one part of the calculation. Advice that was right for Dave may not be right for you : particularly if you have mixed income, shared work with collaborators or receive irregular payments.
Creative accounting support that makes the numbers clearer
The personal allowance is useful, but it isn’t a blanket exemption from tax.
The first £12,570 of taxable income is usually taxed at 0%. Income above that is taxed in slices. National Insurance may still apply. And if your gross self-employed income passes the registration threshold, you may need to file a return even when your income tax bill is nil.
That’s the real answer to Dave’s claim.
At Creative and Numbers, we specialise in accounting for creative professionals across the UK. Whether you’re a musician, filmmaker, actor, designer, artist or freelance production professional, we’ll help you understand what your numbers actually mean : without drowning you in jargon.
Get in touch with Creative and Numbers for clear, practical support with bookkeeping, Self Assessment and your wider accounting needs.
Dave can stick to the pub quiz. You’ve got a creative career to protect.
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