United Kingdom

Personal income tax rates

Income tax is charged at graduated rates, with higher rates of income tax applying to higher bands of income. Tax is charged on total income (from all earned and investment sources) less certain deductions and allowances. 

In Autumn 2022, it was announced that the current personal allowance and certain tax thresholds would be frozen until April 2028. This has been confirmed in the Autumn Budget 2024.

The main allowance is a tax-free amount known as the ‘personal allowance’, which is GBP 12,570 in 2025/26. Most individuals can claim a personal allowance, unless their income is over GBP 125,140. If your income is over GBP 100,000, your personal allowance will be reduced by GBP 1 for every GBP 2 that your income exceeds GBP 100,000.

The net amount after allowances is usually referred to as an individual's taxable income. The graduated rates of income tax vary slightly depending on whether the income is from earnings or investments.

Income tax bands and rates for taxpayers resident in England, Wales, or Northern Ireland are as follows:

* The 0% starting rate is for savings income only. If non-savings income (which takes up the first ‘slice’ of income) is above this limit, then the 0% starting rate will not apply.

Note that dividends are always treated as the top slice of income and will be taxed at an individual's highest marginal tax rate (see Dividend income in the Income determination section for rates specifically applicable to dividends). ‘Savings income’ is the next slice down, and other income (such as earnings) will be the lowest slice. The most common form of ‘savings income’ is interest, but certain other forms of income are also included.

** A dividend allowance applies to the first GBP 500 of an individual’s dividend income. The allowance operates as a 0% tax rate. Please note this does not apply to dividends from shares held within an Individual Savings Account (ISA). 

The dividend allowance does not reduce total income for tax purposes. Dividend income that is within the ‘allowance’ still counts towards an individual’s basic and higher rate limits.

Scottish Income Tax

Individuals resident in Scotland pay Scottish Income Tax on employment income, pension income and most other taxable income, apart from dividend and savings income, which is taxed at the rates above, in line with the rest of the United Kingdom.

The Scottish Income Tax rates are as follows:

Trustees and income tax

The income tax rates paid by trustees depend on the type of trust involved. 

The first GBP 500 of income arising to the trustees of accumulation or discretionary trusts is taxed at either 8.75% (dividends) or 20% (all other income). Thereafter, income is taxed at 39.35% (dividends) or 45% (all other income).

Interest in possession trustees pay income tax at 8.75% (dividends) or 20% (all other income). Income mandated to the beneficiary is taxed on the beneficiary and should be included on their tax return.

Trustees do not qualify for the dividend allowance.

There are special rules for other types of trusts (e.g. non-resident trusts, settlor-interested trusts, and trusts for vulnerable people). Advice should be sought as trust taxation is a complex area.

Basis of taxation in the United Kingdom

The basis of taxation in the United Kingdom changed significantly from 6 April 2025. We have outlined these changes below. The rules applicable up to 5 April 2025 can be found in the second part of this section.

Basis of taxation from 6 April 2025

Until 5 April 2025 the basis of taxation was dependant on two factors, an individual's residence status, under the Statutory Residence Test (‘SRT’), and their domicile status. The relevance of domicile in determining the extent to which an individual is subject to UK taxation was (broadly) abolished with effect from 6 April 2025. Instead a new residence-based regime came into effect, along with transitional measures designed to smooth the impact of the significant changes.

Key changes with effect from 6 April 2025 

• Individuals are subject to UK tax on their worldwide income and gains where they have been a UK resident (under the SRT) for more than four tax years, regardless of their domicile status.
• For UK Inheritance Tax purposes, the concept of domicile has been replaced by the concept of a long term UK resident.  An individual will be a long term UK resident if they have been UK resident under the SRT for at least 10 of the previous 20 tax years. Long term UK residents are subject to UK IHT on their worldwide assets.
• New arrivers to the UK qualify for a new foreign income and gains (FIG) regime for their first four years of UK residence, provided they have been non-UK tax resident for the previous ten years. This applies irrespective of whether that person might have been regarded as domiciled in the UK under the ‘old regime’.
• Under the FIG regime,  new arrivers do not have to pay tax on their foreign income and gains and will be free to bring those funds into the United Kingdom, albeit with an obligation to report to HMRC any amounts  on which they are claiming the exemption.

• Overseas workday relief (OWR) is available for eligible employees in their first four years of UK tax residence, as long as they are eligible for the FIG regime. This relief applies to income from employment duties carried out overseas. The new regime is subject to an annual cap (exception for those who arrived in 2023/24 or 2024/25). That cap will be the lesser of GBP 300,000 or 30% of 'relevant qualifying employment income' per tax year (i.e. the maximum relief over the four years is GBP 1.2 million).
• The rate of CGT applying to carried interest will increase to 32% from 6 April 2025 and then the carried interest regime will move to the income tax framework from 6 April 2026 onwards. See ‘Significant developments’ section for more details.

Transitional measures for non-UK domiciled individuals

• The Temporary Repatriation Facility (TRF) offers a three-tax-year window (2025/26, 2026/27, and 2027/28) for historic (pre 6 April 2025) unremitted income and gains to be brought to the United Kingdom and taxed at a favourable rate of 12% for the first two years and 15% for the third year.
• CGT rebasing is allowed for non-UK assets sold after 5 April 2025 that were owned at 5 April 2017. To be eligible the individual must have made a claim for the remittance basis in 2017/18 or a subsequent tax year. Assets will be rebased to their market value as at 6 April 2017; they must have been held by the individual at that date and situated outside the United Kingdom from 6 March 2024 to 5 April 2025. 

Inheritance tax (IHT)

In line with the above, on 6 April 2025, the previous IHT system, based on domicile, was replaced with a residence-based system.

Individuals are now only subject to UK IHT on their non-UK situated assets once they have been resident in the United Kingdom for more than ten of the last twenty tax years. An individual who has been UK resident for more than ten of the last twenty tax years will be considered a ‘long-term resident’ (LTR) and this will dictate the exposure to UK IHT.

It is worth noting that years spent in the United Kingdom as a student and years where an individual was tax resident in the United Kingdom under domestic law, but resident under treaty tie-break provisions elsewhere, also count towards the 10 years for these purposes.  

Please note that UK situated assets are always within the scope of UK IHT, irrespective of an individual’s domicile or residence status, and so LTR status is only relevant to any exposure on non UK situated assets.

LTRs who subsequently leave the United Kingdom will remain subject to UK IHT for up to ten years after they cease to be UK resident.

The length of this LTR IHT ‘tail’ will be three years for those individuals who were resident in the United Kingdom between ten and thirteen tax years, increasing by one year for every additional year of UK residence, up to a total of ten years. 

Many offshore trusts will also be brought within the scope of UK IHT where the settlor is an LTR in the United Kingdom (i.e. has been in the United Kingdom for more than ten years). This is an area of particular complexity, and so specific advice should be sought for any individuals who have settled trusts and become UK tax resident, or became LTR with effect from 6 April 2025.

Other points to note

• Business investment relief (BIR) will continue to be available for qualifying investments made prior to 6 April 2025 and new investments made on or after 6 April 2025 using pre-6 April 2025 foreign income and gains. New investments can continue to be made until 5 April 2028, after which time it will not be possible to make any further investments under BIR.
• The specific ‘Trust protections’ that were introduced in 2017 for non UK domiciled individuals/settlors of non UK resident trusts have been removed. From 6 April 2025 income and gains arising within a non UK resident trust and/or its underlying companies will be taxable on the UK resident settlor (if settlor interested) if they are not eligible for FIG or any other form of exemption (such as the motive defence).
• Notably certain double tax treaties relating to IHT/Estate taxes, in particular those between the UK and India and Pakistan, remain in force and continue to make reference to (and rely upon) the concept of domicile as a matter of general law.

Basis of taxation prior to 6 April 2025

Prior to 6 April 2025 an individual's basis of taxation in the United Kingdom depended on both their residence and domicile position.

 Individuals resident and domiciled in the United Kingdom, were taxed on their worldwide income and capital gains.

Non-UK tax residents were generally subject to income tax only on their UK-source income. 

Prior to 6 April 2025 if an individual was resident but neither domiciled nor deemed domiciled in the United Kingdom, they could elect to use the remittance basis of taxation. This meant that, in general, their non-UK income and capital gains were only taxed if they were remitted to or used in the United Kingdom. Different rules applied in respect of employment income.

UK resident but non-domiciled individuals (UKRNDs) and the remittance basis of taxation

Whilst domicile remains a common law concept,  as of 6 April 2025 an individual’s liability to UK tax  is determined with reference to their residence rather than domicile status. Whilst an individual’s domicile status may remain relevant for the purposes of certain transitional provision, broadly, he details below therefore apply up until 5 April 2025 only.

Meaning of domicile

Up until 6 April 2025, an individual’s domicile status was a key factor in determining how their non-UK income and gains are taxed whilst they are resident in the United Kingdom. The concept of domicile for UK tax purposes is distinct from citizenship, nationality, or residence and may differ from another jurisdiction’s concept of domicile. In broad terms, individuals are domiciled in the country that is their permanent or natural home or where they have a ‘settled intention to permanently reside’. An individual cannot be without a domicile, can only have one domicile at a time, and are generally regarded as domiciled in the country where they have their permanent home.

There are three classes of common law domicile that a person can acquire throughout their life:

• Domicile of origin: Generally follows that of their father at the time of their birth, if their parents were married.
• Domicile of dependency: Generally tracks changes to the domicile of their father, whilst a child is still a minor.
• Domicile of choice: Acquired on settling in another country with the intention to remain there permanently or indefinitely.

Deemed domicile

From 6 April 2017 to 5 April 2025, where a non-UK domiciled individual ('non-dom') had been resident in the United Kingdom for fifteen or more of the last twenty tax years, they were treated as deemed domiciled in the United Kingdom for all taxes and could not claim the remittance basis. 

Individuals who had previously claimed non-dom status were therefore required to pay tax on their worldwide income and gains and be subject to UK inheritance tax (IHT) on their worldwide assets, in the same way as UK domiciled individuals. A child who grew up with non-UK domiciled parents in the United Kingdom could be deemed domiciled by adulthood.

It is worth noting that years spent in the United Kingdom as a student and years where an individual was tax resident in the United Kingdom under domestic law, but resident under treaty tie-break provisions elsewhere, also count towards the fifteen years for deemed domicile purposes.  

From 6 April 2025, domicile no longer determines an individual’s liability to UK tax. Instead, it is  based solely on their residence position. See ‘Basis of taxation from 6 April 2025’ above for more details.

Formerly domiciled residents (FDRs)

Under rules prior to 6 April 2025, individuals born in the United Kingdom with a UK domicile of origin who had acquired a domicile of choice elsewhere, but returned to the United Kingdom (i.e. FDRs), had a one-year grace period on resuming UK residence before their worldwide assets became subject to IHT. In this scenario they would also be subject to income and capital gains tax on the arising basis for any tax year of UK residence.

Any trusts set up by FDRs whilst they were non-UK domiciled fell within the scope of UK IHT. In addition, FDRs were not be able to benefit from the trust protections or asset rebasing as set out in the ‘CGT rebasing’ section. (See ‘Other taxes’ for more details) .

Domicile status

His Majesty’s Revenue and Customs (HMRC) are increasingly enquiring into claims by individuals to be non-UK domiciled, especially where the individual has been resident in the United Kingdom for many years, does not retain strong ties to the country of origin, and/or cannot demonstrate the circumstances in which they will leave the United Kingdom. There are several circumstances in which domicile for general law purposes remains important, even once an individual has become deemed domiciled for tax purposes. 

The remittance basis (not available after 5 April 2025)

UK-resident individuals eligible for the remittance basis of taxation prior to 6 April 2025 include the following:

1. Non-UK domiciled individuals who are under 18 years of age and have no UK sources of income and gains and do not remit any foreign income or gains. The remittance basis applies automatically in this case (i.e. no UK tax return is required).
2. Non-UK domiciled individuals who have unremitted non-UK income and gains on non-UK assets that are less than GBP 2,000 in the UK tax year. The remittance basis applies automatically in this case, and no claim (or tax return) is required.
3. Non-UK domiciled individuals who have been UK resident for less than seven out of the preceding nine tax years. The remittance basis must be claimed (by filing a tax return) in this case, but no remittance basis charge needs to be paid.
4. Non-UK domiciled individuals who have been UK-resident for seven or more of the preceding tax years and pay (if necessary) the annual remittance basis charge (see below). A claim is required in this case in order to benefit from the remittance basis.

If this claim is made (categories 3 and 4 above), the individual  gives up any entitlement to the tax-free personal allowance (see the Deductions section) and capital gains tax (CGT) annual exemption (see the Other taxes section).

Remittance basis charge (RBC) (only applicable up to 5 April 2025)

From 6 April 2025 the remittance basis of taxation was abolished meaning the remittance basis charge is only payable up to and including the 2024/25 UK tax year. Prior to this, an individual over 18 years of age who had been  resident in the United Kingdom in seven or more of the previous nine years  would have to pay an additional tax charge (i.e. RBC) of GBP 30,000 each tax year to enable them to use the remittance basis of taxation

The RBC is GBP 60,000 for those non-domiciled individuals who had been resident in the United Kingdom for twelve or more of the previous fourteen years.

Eligible individuals in categories 1 and 2 above were be taxed on the remittance basis but did not lose their allowances and did not have to pay the RBC.

The choice of claiming or not claiming the remittance basis can be made annually up to 5 April 2025, so that a taxpayer can calculate each year whether claiming the remittance basis will cost more or less than being taxed on the arising basis on worldwide income and gains. 

Remittances

Prior to 5 April 2025, a tax charge would arise if foreign income and gains were remitted to the United Kingdom. This tax charge is in addition to any RBC paid by the taxpayer for using the remittance basis.

The tax payable in relation to remittances depends on what the individual has or is deemed to have remitted to the United Kingdom. 

It is recommended that care is taken prior to an individual becoming UK tax resident to structure their financial arrangements and bank accounts in such a way as to facilitate easy identification of funds that are to be brought to the United Kingdom. 

There are complex statutory ordering rules for determining how a transfer from a 'mixed' fund (i.e. an account comprising of a mixture of capital/foreign income/gains and/or from different tax years) is treated.

Example remittances

Examples of actions that may constitute a remittance are as follows (please note this list is not exhaustive):

• Transferring cash or bank balances to the United Kingdom.
• Withdrawing cash from a non-UK bank account in the United Kingdom.
• Using non-UK funds to settle a UK credit card debt.
• Using non-UK funds to settle liabilities incurred in the United Kingdom.
• Using non-UK funds to pay interest on, or repay, a loan made in the United Kingdom.
• Using non-UK funds to repay or service a loan made overseas but brought to the United Kingdom.
• Using non-UK funds to settle a non-UK credit card debt for UK expenditure.
• Bringing to the United Kingdom assets that have been purchased overseas with unremitted and untaxed income or gains.
• Generally, using non-UK funds to pay for a service provided in the United Kingdom.

• Using non-UK funds to provide collateral for a loan made overseas but brought to the United Kingdom.

As mentioned at the beginning of this section, the UK government abolished the previous tax regime for non-UK domiciled individuals. The above sections set out the rules in place in the United Kingdom prior to 6 April 2025.  Please see ‘Basis of taxation from 6 April 2025’ for an overview of the current rules.

Alternative minimum tax

There is no alternative minimum tax in the United Kingdom.

Taxation of children

Children under 18 are taxable in their own right unless their income derives from gifts from a parent, where the amount is in excess of GBP 100 it is taxed on the parent.

Local income taxes

There are no local taxes on income in the United Kingdom.