Personal Taxes in the UK
An Overview
(Updated for the 2025/26 Tax Year)
Understanding how personal taxation works in the UK is important for residents, non-residents, and individuals with different domicile statuses. The rules can be complex, but this guide explains the essentials in a clear and accessible way.(!) Information reflects legislation for the current year. As rules may change, always check current HMRC guidance or speak with a qualified advisor.
Income Tax
Residents
UK residents are subject to income tax on their worldwide income.The UK uses a progressive income tax system with several bands:
20% — on income up to £37,700 (after the personal allowance)
40% — on income from £37,701 to £125,140
45% — on income above £125,140
Note: Scotland has separate income tax rates and bands for employment and pension income. Dividend and savings income use the UK rates.
Dividend Income
Dividend income is taxed from 8.75% to 39.35% depending on the individual’s overall tax band. Dividend Allowance is £500 per year.
Non-Residents
Non-residents are typically subject to UK income tax only on their UK-source income (e.g., rental property, employment in the UK).
Non-residents may qualify for the Personal Allowance in limited cases - for example, if eligible under a relevant tax treaty. Where eligible, the allowance must be claimed.
Domicile Status
⚠️ Important update from 6 April 2025
The UK no longer uses domicile to determine liability for income tax or capital gains tax.The non-dom regime and the remittance basis have been abolished.
Instead, for individuals becoming UK tax residents after 10 consecutive years of non-residence, the UK introduced the Foreign Income and Gains (FIG) regime:
available for the first 4 tax years of UK residence
applies automatically if the criteria are met
foreign income and gains are not subject to UK tax, and
can be brought (remitted) to the UK tax-free during those 4 years.
After the 4-year period ends, residents are taxed on their worldwide income and gains in the usual way.
Historical rules (relevant only up to 5 April 2025)
Domiciled (Deemed Dom) — pre-2025 rules
UK-domiciled individuals were subject to UK tax on their worldwide income and gains, and to inheritance tax (IHT) on worldwide assets.
Non-Domiciled (Non-Dom) — pre-2025 rules
Non-domiciled individuals could claim the remittance basis, under which foreign income and gains were taxed only when brought to the UK.
These rules are now replaced by the FIG regime described above.
Tax Declarations
Residents
UK residents must file a Self Assessment tax return if they meet certain criteria, such as having:
self-employment income
rental income
foreign income
capital gains
or other taxable sources not covered under PAYE.
Non-Residents
Non-residents must file a Self Assessment tax return if they have taxable UK income or gains exceeding the relevant thresholds.
Deadlines
31 January — online filing deadline
31 January — payment of tax owed
31 October — paper filing deadline
National Insurance Contributions (NICs)
NICs fund the UK's social security system, providing benefits such as healthcare and the State Pension.
From April 2024 and through 2025/26, the main NIC rate (Class 1) for employees is 8%, falling to 2% above the Upper Earnings Limit.
Both residents and non-residents who work in the UK may be liable to NICs, depending on income and employment status.
Inheritance Tax (IHT)
IHT is charged on the value of an individual's estate on death.
⚠️ Update from 6 April 2025
For IHT purposes, the UK has replaced the concept of domicile with the concept of long-term UK residence.
Individuals who meet long-term residence criteria may be subject to IHT on their worldwide assets, while those who do not may remain subject primarily on UK-situated assets.
(The old “deemed domicile for IHT” rules apply only up to 5 April 2025.)
Summary
Navigating the UK's personal tax system requires understanding income tax rates, residence rules, the new FIG regime, tax declaration requirements, and other considerations. Residents and non-residents should be aware of their tax obligations and opportunities for tax planning.
Seeking advice from a qualified tax adviser or accountant can be invaluable in ensuring compliance with UK tax laws and optimizing one’s tax position. It’s also important to stay updated on tax law changes, as rates and regulations continue to evolve.
We are here to assist you with residency reviews, non-dom planning, expat tax matters, and cross-border compliance. Contact us for a confidential consultation by phone or video