So what is 'cloth allowance'?
It is an allowance to compensate for the extra millimetres taken up when fabric is folded. See this pink fabric - when folded it uses about 4mm of fabric just to turn the corner:
This fabric is quite thick, most fabrics will use about 2mm, and chiffon will use even less. The thicker the fabric, the more cloth allowance you need.
Why do you have cloth allowance?
On most bagged out edges we don't want the seam to be visible, we want it to sit slightly underneath the edge out of view. It just looks better!
For instance - the edge of this pocket flap:
the edges of these neckline and armhole facings:
The edges of this collar:
How do you add cloth allowance?
To enable the seam to lie underneath the edge, we need to add an additional allowance to the edges of the outside piece, or alternatively trim some off the edges of the inside piece.
The pocket flap - make a separate pocket flap lining, but trim 2mm from all bag out edges (red line).
For the neck/armhole facing, trace the outer bodice and trim 3mm from the neckline and armhole edges (red line).
Now collars (and lapels) are a little different, because they have two folds - the roll line, and the bagged out edge - I hope my dinky diagram is legible:
To accommodate the bagged out edges, I added about 5mm to the outer edge of the top collar.
To accommodate the fold over the roll line I added an additional 6mm. This was done by adding 3mm at the neck edge for the stand, and 3mm to the outer edge for the fall.
So a total of 11mm extra length was added at the centre back for my pink fabric - this is quite a lot, most fabrics only need about half this amount.
The front facing on a typical jacket deserves a special mention too. The front facing is outermost at the lapel, and becomes innermost below the breakpoint. You need to add cloth allowance to the front facing around the lapel, taper it to zero at the break point, and subtract it from the front facing at the front edge, like this:
Some people compensate for cloth allowance whilst sewing, by purposely misaligning raw edges or pinning tucks. But I'm a patternmaker so I do this at the pattern stage - not just because it suits bulk production, but because it is also more precise.
Note that in some cases you will not require cloth allowance - if for instance you are going to pipe an edge, you will want both raw edges to meet exactly.
Your pattern may or may not have cloth allowance incorporated - to find out lay the pieces on top of each other and see if there is any difference, or enough difference for your type of fabric - and adjust accordingly.
How do I know how much to add on/take off?
The amounts noted above are what I actually used in those examples, so you can use that as a guide. You will need to add more or less depending on the thickness of your cloth, and you soon get a feel for what you need with experience.
You can also gauge approximately how much you need by using a dress stand, or a friend. Cut two pieces of equal width, pin them together at the neckline, and fold your mock collar down - your 'top collar' will fall short like this:
This difference is the amount you need to add for the roll line only, I double this to add for the bag out edge as well. This photo is telling me I need to add 5mm for the roll line, ie 10mm in total - which is almost what I did.
But now one edge is longer than the other and so it won't match!
This excess is intentional, and trust me it will sew together alright, just make sure those notches match! If you do have difficulty (I sometimes have problems getting small slippery pieces like pocket flap linings to fit) sew with the longer edge underneath, so the feed dogs of your machine assist you to ease the longer layer in. Once you turn and press, everything will fall into place just like magic - well almost!
Hope this helps and happy sewing. Now you can make your cloth go around the bend, instead of it making you go around the bend!