United Kingdom (GB)
The United Kingdom — comprising England, Scotland, Wales, and Northern Ireland — is a constitutional monarchy and parliamentary democracy of 68 million people, and one of the world's leading economies, cultural powerhouses, and global cities.
Tax & Payslip Guide
Understanding your taxes in United Kingdom — tax year UK tax year: 6 April to 5 April (a uniquely British quirk dating back to the switch from the Julian to Gregorian calendar in 1752).
📊 Income Tax Brackets
| Income from | Income to | Rate | Notes |
|---|---|---|---|
| 0 | 12,570 | 0% (Personal Allowance) | The Personal Allowance for 2025/26 is £12,570. Income below this threshold is not subject to income tax. The Personal Allowance tapers to zero for income above £100,000 (reducing by £1 for every £2 over £100,000), creating an effective 60% marginal rate between £100,000 and £125,140. |
| 12,571 | 50,270 | 20% (Basic Rate) | Basic rate band: taxable income from £12,571 to £50,270. The most common income tax band for the majority of UK workers. Savings income in the basic rate band: 20% (but a £1,000 savings interest allowance before tax applies). Dividends in the basic rate band: 8.75%. |
| 50,271 | 125,140 | 40% (Higher Rate) | Higher rate band: taxable income from £50,271 to £125,140. Pension contributions are particularly tax-efficient here — contributions attract 40% relief. Savings income: 40%. Dividends: 33.75%. Many higher rate taxpayers can reclaim additional pension relief via Self Assessment. |
| 125,141 | ∞ | 45% (Additional Rate) | Additional (top) rate: taxable income above £125,140. The Personal Allowance has been fully tapered to zero at this level. Savings income: 45%. Dividends: 39.35%. Self Assessment mandatory for all additional rate taxpayers. |
🏛️ Social Contributions
National Insurance (NI) contributions fund the NHS, state pension, and social security benefits. Employee contributions: 8% on the "primary threshold" to upper earnings limit; 2% above. Employer contributions: 15% above the secondary threshold (raised from 13.8% in the Autumn 2024 Budget, effective April 2025). NI is calculated weekly/monthly (not annually like income tax). A full-year National Insurance record requires minimum earnings or credits each tax year.
Automatic enrolment into a workplace pension is mandatory for eligible employees (aged 22–66, earning above £10,000/year). Minimum contributions: 5% employee, 3% employer (total 8%). Most large employers contribute more. The pension provider is chosen by the employer — NEST (National Employment Savings Trust) is the government-backed default. You can opt out but lose the employer contribution.
Student loan repayments are collected via PAYE (same system as income tax and NI). The plan type depends on when and where you studied. Plan 2 (most common for England/Wales since 2012) charges 9% above the £27,295 threshold. Repayments stop when the loan is paid off or (for Plan 2) after 30 years, when the balance is written off. New arrivals with overseas student loans should not be affected by UK student loan deductions.
🛒 VAT Rates
VAT is called VAT (Value Added Tax) in the UK. The UK set its own VAT rates after Brexit. Zero-rating of food is broad but excludes confectionery, crisps, alcohol, ice cream, and food for immediate consumption. VAT registration threshold: £90,000 annual taxable turnover (2025/26). All prices in UK retail are displayed inclusive of VAT.
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🌍 Special Expat Tax Rules
From April 2025, the UK's non-domicile (non-dom) tax regime was abolished. It has been replaced with a 4-year Foreign Income and Gains (FIG) exemption for new arrivals who have not been UK tax resident in the preceding 10 years. Under the FIG regime, qualifying individuals pay no UK tax on foreign income and gains for the first 4 years of UK tax residence. This is a significant change from the previous non-dom regime which could last indefinitely. After 4 years, worldwide income is fully taxable. The UK operates a worldwide taxation system for residents — all income and gains from wherever in the world must be declared. UK tax residence is determined by the Statutory Residence Test (SRT).
📋 Double Tax Treaties
The UK has an extensive network of double taxation agreements (DTAs) with over 130 countries — the world's largest network. Key treaties include those with the USA (comprehensive treaty since 1975/2001), Australia, Canada, Germany, France, Ireland, China, India, Japan, and all EU member states. Post-Brexit, the EU/UK Trade and Cooperation Agreement does not include broad tax provisions — individual country DTAs still apply. The UK applies OECD model convention. DTAs prevent double taxation on salary, dividends, royalties, and pensions. Foreign Tax Credit Relief available for tax paid overseas.
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