United Kingdom Tax Rates

Income Tax Brackets

The UK uses a Pay As You Earn (PAYE) system with four income tax bands. The Personal Allowance of £12,570 is tax-free. Income between £12,571 and £50,270 is taxed at the basic rate of 20%. The higher rate of 40% applies to income from £50,271 to £125,140, and the additional rate of 45% applies to income exceeding £125,140. The Personal Allowance is gradually reduced for income over £100,000, effectively creating a 60% marginal rate between £100,000 and £125,140.

Corporate Tax

The main rate of UK corporation tax is 25%, applicable to companies with profits exceeding £250,000. A small profits rate of 19% applies to companies with profits of £50,000 or less. Companies with profits between £50,000 and £250,000 benefit from marginal relief, resulting in an effective rate between 19% and 25%. The UK offers various reliefs including R&D tax credits, Patent Box (10% rate on qualifying patent income), and Annual Investment Allowance.

Capital Gains Tax

Capital gains tax in the UK is charged at 10% for basic rate taxpayers and 20% for higher and additional rate taxpayers on most assets. Residential property disposals that are not a main residence are taxed at higher rates of 18% for basic rate taxpayers and 24% for higher and additional rate taxpayers. The UK does not distinguish between short-term and long-term gains by holding period. An annual exempt amount of £3,000 applies before CGT is due.

VAT / Sales Tax

The UK's standard VAT rate is 20%, with a reduced rate of 5% applying to certain goods and services such as domestic fuel and power, children's car seats, and some energy-saving materials. A zero rate (0%) applies to essentials including most food items, children's clothing, books, newspapers, and public transport. Some supplies are VAT exempt, including financial services, education, and health services. Businesses must register for VAT if taxable turnover exceeds the registration threshold.

Cryptocurrency Tax

HMRC treats cryptocurrency as a form of property for tax purposes. Disposing of crypto assets (including selling, exchanging for another cryptocurrency, or using crypto to pay for goods and services) may give rise to a capital gains tax liability. The same CGT rates apply as for other assets: 10% for basic rate taxpayers and 20% for higher and additional rate taxpayers. The annual exempt amount can be used against crypto gains. Mining and staking rewards may be treated as income and subject to income tax and National Insurance contributions.

Tax Treaties

The United Kingdom has one of the world's largest networks of double taxation treaties, with approximately 130 agreements in force. These treaties prevent double taxation and provide mechanisms for resolving cross-border tax disputes. They typically reduce or eliminate withholding taxes on dividends, interest, and royalties between treaty partners. The UK's extensive treaty network reflects its position as a major global financial centre and facilitates international trade and investment.

Key Details

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