Tax in the United Kingdom
The UK tax year runs 6 April to 5 April, and its system leans on three main pillars for individuals — income tax, National Insurance, and (for the self-employed and landlords) self-assessment — plus corporation tax and VAT for businesses. The biggest recent change is structural rather than a rate: the centuries-old "non-dom" regime was abolished in April 2025.
Income tax bands, 2025/26 (England, Wales & Northern Ireland)
| Band | Income | Rate |
|---|---|---|
| Personal allowance | £0 – £12,570 | 0% |
| Basic rate | £12,571 – £50,270 | 20% |
| Higher rate | £50,271 – £125,140 | 40% |
| Additional rate | over £125,140 | 45% |
The £12,570 personal allowance is frozen until April 2028 (fiscal drag), and it tapers away entirely by £125,140 for those earning over £100,000 — £1 of allowance lost for every £2 earned above that threshold. Scotland sets its own bands and rates, which differ from the above.
National Insurance
Employees pay Class 1 National Insurance at 8% on earnings between the primary threshold (£242/week) and the upper earnings limit (£967/week), and 2% above that. Employers pay a separate NI charge that rose sharply on 6 April 2025: the rate increased from 13.8% to 15%, and the threshold at which it starts to apply was cut from £9,100 to just £5,000 a year per employee — a significant tax rise on employment itself, felt by businesses rather than workers directly.
Self-assessment and Making Tax Digital
Anyone self-employed, a landlord, a higher earner with untaxed income, or otherwise outside simple PAYE must file a self-assessment return by 31 January following the tax year. HMRC is phasing in Making Tax Digital for Income Tax (MTD for ITSA), which will require digital record-keeping and quarterly updates rather than one annual return — rolling out from April 2026 for the highest earners first, extending to more taxpayers in later phases.
Corporation tax
UK corporation tax runs on a two-rate system for the financial year to 31 March 2026: companies with taxable profits of £50,000 or less pay 19%, companies with profits above £250,000 pay 25%, and profits in between qualify for marginal relief, producing an effective rate that tapers between the two.
VAT
The standard UK VAT rate is 20%. Businesses must register once taxable turnover exceeds £90,000 in any rolling 12-month period (not a fixed tax year), and have 30 days to notify HMRC once they cross it. Making Tax Digital for VAT has applied to all VAT-registered businesses since April 2022 — digital records and MTD-compatible software are mandatory, with no paper-return option.
Residence and the end of "non-dom"
Residence is determined by the UK's Statutory Residence Test, a set of day-count and connecting-factor rules. The bigger story is domicile: from 6 April 2025, the UK abolished its centuries-old non-domicile ("non-dom") regime and replaced it with a residence-based Foreign Income and Gains (FIG) regime. New arrivals who have been non-UK resident for the prior ten tax years can now bring foreign income and gains into the UK completely tax-free for their first four years of residence, with no remittance cap — a materially different (and time-limited) system from the indefinite non-dom status it replaced.
References
GOV.UK — Rates and thresholds for employers 2025/26 · House of Commons Library — Direct taxes 2025/26 · GOV.UK — Self Assessment tax returns · GOV.UK — Corporation Tax rates · GOV.UK — VAT registration thresholds
This page is general information, not tax advice, and not a substitute for advice on your specific situation. UK tax rates, thresholds and reliefs change every tax year — always confirm the current position with HMRC or a qualified professional and contact us before acting. ← Back to Tax overview