UK Taxes: Complete Overview 2025–2026

The UK tax system covers individual income and company profits. It also includes capital gains, inheritance, and property taxes. Most workers use the PAYE system. Self-employed individuals report through Self Assessment. The tax year runs from April 6 to April 5.

General Taxation Principle

The UK applies a progressive taxation system. Higher income means higher tax rates. Tax residency status and income source matter for individuals. The main company tax is Corporation Tax. VAT applies to goods and services transactions.

Rules vary depending on the UK region. Scotland has a separate income tax rate scale. England, Wales, and Northern Ireland use the common system. Official GOV.UK information contains complete data.

Taxes for Individuals

Income Tax

Income tax is charged on taxable income. A personal allowance applies. The standard Personal Allowance for 2025–2026 is £12,570. Allowance decreases with income over £100,000. The reduction is £1 for every £2 over the threshold.

The following basic rates apply for England, Wales, and Northern Ireland:

• 20% — basic rate.
• 40% — higher rate.
• 45% — additional rate.

Tax is calculated by bands. A single rate on total income does not apply.

Taxable and Non-Taxable Income

The following categories usually fall under taxable income:

• Salary and self-employment profit.
• Pension payments and rental income.
• Part of savings interest.
• Some employer benefits and bonuses.
• Certain trust and investment income.

The system provides non-taxable limits. Separate allowances exist for dividends and capital gains. Special regimes also apply to savings.

Tax Reliefs

The following reliefs are among the most significant:

• Personal Allowance.
• Blind Person’s Allowance.
• Tax relief on pension contributions.
• Reliefs for charitable donations.
• Separate deductions for dividends and capital gains.

National Insurance Contributions (NICs)

National Insurance contributions are paid on employment income. For workers in 2025–2026, the main Class 1 rate is 8%. This rate applies within the main earnings band. The rate is 2% on income above the upper threshold.

Amounts are usually withheld by the employer through payroll. NICs fund the state pension system. They also fund certain social protection elements. Different rules apply to self-employed individuals.

PAYE and Self Assessment

The PAYE system is used by employers for automatic tax withholding. The employer runs payroll and transfers data to HMRC. Withheld amounts are paid to the government.

Self Assessment is the tax return filing system. It is designed for self-employed and those with additional income. The online return is filed by January 31 of the following year.

Foreign Income and Residency Status

Foreign income taxation depends on residency. The previous remittance basis for non-dom was abolished from April 6, 2025. The new 4-year foreign income and gains (FIG) regime replaced it. This regime is designed for new UK residents.

Capital Gains Tax (CGT)

Capital Gains Tax is charged on profit received. The tax arises when selling shares or property. It also applies to investment assets.

For 2025–2026, the annual exempt amount is £3,000. After applying the minimum, the rate depends on income and asset. The rates 18% and 24% apply to normal gains. The same rates apply to residential property from April 6, 2025.

Trust rules differ. They have their own calculation procedure and separate norms.

Inheritance Tax (IHT)

Inheritance Tax applies to the deceased’s estate. The basic non-taxable threshold is £325,000. Additionally, residence nil-rate band applies when passing property to descendants. The total threshold can reach £500,000 in some cases.

Unused threshold portion transfers to the spouse. The standard tax rate is 40%. It can be reduced to 36% with charitable bequests.

Tax is usually paid from the estate. In some cases, consequences arise for property recipients.

Property Taxes

Stamp Duty Land Tax (SDLT)

Stamp Duty Land Tax is paid when purchasing property. It applies in England and Northern Ireland. Separate equivalents apply for Scotland and Wales. SDLT is calculated on a progressive scale.

The tax amount depends on the following factors:

• Property value.
• Property type.
• First or additional purchase.
• Transaction structure.

Higher rates apply for additional dwellings. From October 31, 2024, the surcharge is 5%. HMRC treats linked purchases as a single transaction. The return is filed and tax paid within 14 days.

Council Tax

Council Tax is a local property tax. It funds municipal services. The amount depends on property band and council rates.

The following factors are also considered:

• Household composition.
• Available discounts and reliefs.

Discounts exist for low-income individuals. Discounts are also provided to students and disabled people. Exact conditions are determined locally.

Investment and Share Taxes

Stamp Duty arises when purchasing UK shares. Typically, the rate is 0.5% of the purchase price. Stamp duty is usually not paid when selling shares. However, Capital Gains Tax may arise upon profit.

Business Taxes

Corporation Tax

Corporation Tax is the main company profit tax. The following benchmarks apply from April 1, 2023:

• 19% — for profits up to £50,000.
• 25% — for profits over £250,000.
• Marginal relief applies to the intermediate band.

Special payment rules apply to large companies. An installment system also applies. Company groups are considered when assessing status.

VAT

VAT is value added tax. The standard rate is 20%. Reduced rate is 5%. The zero rate is 0%. Some transactions are exempt from VAT.

Zero rate and exemption are different concepts. At 0% rate, the transaction stays within the VAT system. At exemption, the transaction exits the system.

Mandatory registration is required for turnover over £90,000. The deregistration threshold is £88,000. These values apply from April 1, 2024.

A registered VAT payer must perform the following actions:

• Charge VAT at the appropriate rate.
• Keep records of input and output tax.
• Submit VAT returns quarterly.
• Pay tax to HMRC or claim a refund.

Practical Nuances

Several points are important when working with UK taxes. The tax year runs from April 6 to April 5. Income Tax rates for Scotland differ from the rest of the UK. Residency status and new FIG rules significantly affect taxation.

Much depends on the region and transaction details for property. For business taxes, correctly determining the VAT registration moment is critical. The right to marginal relief is also important.

Conclusion

The UK tax system is multi-layered. It covers personal income and corporate profits. It also includes investments, inheritance, and property. For employees, obligations are handled through PAYE. Separate analysis is required for additional income.

For 2025–2026, it is important to consider current Income Tax and NICs thresholds. Corporation Tax and VAT thresholds are also critical. The non-dom regime reform changed the approach to foreign income.