We all do wrong if permitted (7)
I believe the answer is:
allowed
'permitted' is the definition.
('allow' can be a synonym of 'permit')
'we all do wrong' is the wordplay.
'wrong' is an anagram indicator.
'we'+'all'+'do'='wealldo'
'wealldo' is an anagram of 'ALLOWED'.
'if' acts as a link.
(Other definitions for allowed that I've seen before include "Permitted and granted" , "Acknowledged" , "Gave permission" , "Legitimate" , "Owned" .)