My finger itches and the skin is peeling off. am i having an allergic reaction or is it something worse?

Possibly: Contact dermatitis allergic reactions commonly affect the hands however, what you are discribing may also be a very common condition known as dishydrotic eczema. Both conditions may respond to topical otc steroids (hydrocortisone). If this fails to control your symptoms you should consult a dermatologist.

Itchy peeling finger: Itching can often be a sign of an allergic reaction, and peeling is often found in contact dermatitis reactions, but to really diagnose your itchy peeling finger, a doctor would have to see it. This is the usual answer with visually-diagnosed skin problems. Fungal infections of the finger can also itch and peel and a doctor can sometimes tell the difference from the appearance or a KOH test.