Tax-Free Allowance
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An amount of income that is not subject to income tax, effectively creating a zero-rate band at the bottom of the tax scale.
## Tax-Free Allowance
A tax-free allowance (personal allowance, basic exemption, Grundfreibetrag) is the amount of income everyone can earn before paying income tax.
### Amounts by Country (2025)
| Country | Amount | Local Term |
|---------|--------|------------|
| UK | £12,570 | Personal Allowance |
| Germany | €11,784 | Grundfreibetrag |
| Australia | A$18,200 | Tax-free threshold |
| India | ₹300,000 | Basic exemption (new regime) |
| Canada | C$16,129 | Basic Personal Amount |
| US | $15,200 | Standard Deduction (functionally similar) |
### Phase-Outs
Some countries reduce the allowance for high earners. The UK reduces the Personal Allowance by £1 for every £2 earned above £100,000, eliminating it entirely at £125,140. This creates an effective 60% marginal rate in the phase-out range.
### Significance
The tax-free allowance determines at what income level tax begins and is a key policy lever for reducing the tax burden on low earners.