United Kingdom

National insurance contributions (NICs)

Social security payments are termed 'national insurance contributions' (NICs) in the United Kingdom. These are payable by employers, employees, and those that have their own trades (the self-employed).

The Chancellor of the Exchequer announced changes to NICs in the Autumn 2024 Budget. The rates are summarised as follows:

• For the 2025/26 tax year, employees pay Class 1 NICs at 8% on earnings between GBP 12,571 and GBP 50,270. The rate is 2% on any earnings above GBP 50,270. 
• Employers also currently pay Class 1 NICs at 15% on their employees’ earnings above GBP 5,000. The secondary threshold (the amount at which employers start to pay NICs) will remain at GBP 5,000 a year from 6 April 2025 until 6 April 2028 and then increased in line with the CPI thereafter.

• Self-employed individuals pay Class 4 NICs on their profits from self-employment. For the 2025/26 tax year, Class 4 NICs are paid at 6% on profits between GBP 12,570 and GBP 50,270 and 2% on any profits above that.

• Compulsory Class 2 NICs were abolished from April 2024. Access to entitlements and credits is maintained in full. Those who want to contribute voluntarily can still do so at a cost of GBP 3.50 per week.

The Class 4 NIC rate was cut from 9% to 6% from April 2024.

Capital gains tax (CGT)

There is an annual exempt amount for capital gains that are not taxable. This is GBP 3,000 for the 2025/26 tax year. After this, gains are taxed at the lower and higher rates of 18% and 24%, respectively, for disposals made on or after 30 October 2024 (the date of the 2024 Autumn Budget). 

The rate of CGT applying to carried interest increased to 32% from 6 April 2025. The carried interest regime will move to the income tax framework from 6 April 2026 onwards. For most trustees, the CGT annual exemption is half that of individuals.

The CGT exemption is lost if a non-UK domiciled individual claims to be taxed on the remittance basis. See below for changes to the taxation of non-UK domiciled individuals from 1 April 2025.

Gains and losses are calculated by reference to the cost of the asset plus allowable costs of subsequent improvements (although there are special rules for assets acquired before 31 March 1982). Deductions in computing a gain or loss will include the cost of acquisition (including the purchase price, incidental costs of purchase, and any capital enhancements) and incidental costs of disposal (including legal fees, costs of advertising, etc).

There are a number of additional CGT reliefs and exemptions available, depending on the type of transaction or the nature of the asset disposed of. For example, relief may be available on the disposal of an individual’s main home (i.e. Private Residence Relief or PRR). It may also be possible to hold over gains on gifts of certain types of assets.

In relation to shares, there are special rules for identifying shares disposed of from other shares of the same class held by the taxpayer. There are also special provisions that effectively prevent sale and short-term repurchasing of shares and other fungible assets ('bed and breakfasting').

UK residents must report and pay the CGT due on gains arising from disposals of UK residential property 60 days after completion. See below for the tax rules regarding non-UK residents disposing of UK property interests.

Basis of taxation of gains 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.

Individuals are subject to UK tax on their worldwide income and gains where they have been a UK resident for more than four tax years, regardless of their domicile status. Please see ‘Key changes with effect from 6 April 2025’ within the Taxes on personal income section for more information on the new Foreign Income and Gains (FIG) regime and the transitional measures.

Non-UK resident individuals will not generally be subject to CGT, even if the asset disposed of is located in the United Kingdom. There are exceptions to this, however, such as UK trading assets, UK property (residential and commercial) / 'property-rich' companies, and carried interest.

Gains in respect of all UK property and shares in ‘property rich’ non-UK companies disposed of by non-UK residents are subject to UK CGT at the standard rate of CGT, currently 24%. 

There are also special rules for income and capital gains tax where a person has become non-UK resident but returns to the United Kingdom within, broadly, five years, which are referred to as the temporary non-residence rules (see below).

Basis of taxation of gains prior to 6 April 2025

Prior to 6 April 2025, an individual resident and domiciled in the United Kingdom was subject to CGT on their worldwide taxable gains.

Individuals who are UK resident but neither domiciled nor deemed domiciled in the United Kingdom could elect for the remittance basis of taxation prior to 6 April 2025. Under the remittance basis, gains realised on UK situs assets were taxable as they arose (even if the non-UK domiciled taxpayer received the sale proceeds offshore). However, gains on non-UK situs assets were only taxable if the proceeds were remitted to the United Kingdom. Exceptions to this applied in relation to certain carried interest arrangements and where interests in UK property were held via a non-UK company. 

If a taxpayer claimed the remittance basis of taxation prior to 6 April 2025, the taxpayer gave up any entitlement to the tax-free capital gains annual exemption. In addition, if an individual had been resident in the United Kingdom in at least seven out of the previous nine years, the individual had to pay GBP 30,000 a year in order to claim the remittance basis. This charge rose to GBP 60,000 for those non-domiciled individuals that had been resident in the United Kingdom for 12 out of the past 14 years. 

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. Once an individual had been resident in the United Kingdom for 15 out of the previous 20 tax years, they became deemed UK domiciled and the remittance basis was no longer available.

See 'Basis of taxation from 6 April 2025’ within the Taxes on personal income section for more information on the Foreign Income and Gains (FIG) regime and the transitional measures.

Temporary non-residence rules

An individual who leaves the United Kingdom for a period of non-residence of five full tax years or less and who was resident in at least four of the seven tax years prior to the departure will be taxed on a disposal while non-UK resident of any assets that were acquired before ceasing to be UK resident. The assets are treated as if they were disposed of in the year of return to the United Kingdom. Care is therefore needed when individuals come to and leave the United Kingdom.

CGT rebasing

Individuals who became deemed domiciled on 6 April 2017 under the 15/20 year test were able to rebase their directly held foreign assets to their market value as at 5 April 2017, subject to various conditions being met.

For non-UK situs assets sold post 5 April 2025, individuals who made a claim for the remittance basis of taxation duringany of the 2017/18 - 2024/25 tax years may be eligible for their non-UK assets to be rebased to their 5 April 2017 value provided these assets were held outside of the UK from 6 March 2024 to 5 April 2025.

The taxation of non-domiciled individuals changed significantly from 6 April 2025. See above and the Taxes on personal income section for information.

CGT for non-resident individuals

Non-UK resident individuals will not generally be subject to CGT, even if the asset disposed of is located in the United Kingdom. There are exceptions to this, however, such as UK trading assets, UK property (residential and commercial) / 'property-rich' companies and carried interest.

All gains on UK property, and certain disposals of shares in UK property-rich companies, disposed of by non-resident individuals are subject to UK CGT. Non-resident individuals must report these disposals and pay any CGT due within 60 days of completion, even if no tax arises or a loss is made.

Existing reliefs and exemptions available for capital gains continue to be available to non-UK residents, with modifications where necessary. The provisions of any relevant double tax treaty (DTT) would also need to be considered .See ‘Capital gains on disposal of UK immovable property by non-UK residents’ within the Corporate – Income Determination section for further information.

General information on the taxation of gains

Where the taxpayer has invested in assets that are denominated in a foreign (i.e. not sterling) currency, care is needed over foreign exchange gains realised on the disposal of the asset. There is an exemption for gains on foreign currency acquired by the holder for personal expenditure outside the United Kingdom and to foreign currency held in bank accounts, but it does not extend to foreign currency held in other ways.

Artwork and other chattels

There are no specific rules for artwork, and the taxation of income or capital gains will be applied under general principles.

The term 'chattel' means 'tangible movable property' and includes assets such as paintings and antiques. Assets such as buildings, land, leases, or shares are not chattels. A ‘wasting’ chattel is a chattel with a predictable useful life not exceeding 50 years, such as machinery (including antique clocks and watches). Wasting chattels are not taxable when sold. A non-wasting chattel is tangible movable property that will last for more than 50 years (e.g. paintings, antiques, jewellery). If a non-wasting chattel is disposed of for GBP 6,000 or less, any capital gain is exempt from CGT and losses are not allowable. If it is disposed of for more than GBP 6,000 (or is part of a set), further rules apply to calculate the tax due.

Consumption taxes

Value-added tax (VAT)

The standard rate of VAT is 20%.

See the Other taxes section in the Corporate tax summary for information on VAT returns and payments.

Net wealth/worth taxes

Tax is not charged on an individual's wealth each year in the United Kingdom.

Inheritance, estate, and gift taxes

Inheritance tax (IHT) is payable on a taxpayer’s death on the value of assets (not covered by any reliefs or exemptions) that are above the available nil rate band (NRB). The NRB has been GBP 325,000 since 6 April 2009 and is frozen until 5 April 2031. 

IHT is also payable during life on certain 'chargeable lifetime transfers', the most common of which are transfers into most types of trusts. Where an individual makes a lifetime transfer that isn’t immediately chargeable, it may become chargeable if the donor dies within seven years of making the gift. This is referred to as a 'potentially exempt transfer' (PET).

The most valuable IHT relief is Business Relief (previously known as Business Property Relief) which is available on certain business assets. See the Other tax credits and incentives section for more details. 

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

Individuals are only subject to UK IHT on their non-UK situated assets once they have been resident in the United Kingdom in 10 out of the previous 20 tax years. An individual who has been UK resident for at least 10 of the previous 20 tax years will be considered a ‘long-term resident’ (LTR) and this will determine their exposure to UK IHT.

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 10 and 13 tax years, increasing by one year for every additional year of UK residence, up to a total of ten years.

There are transitional rules for non-UK domiciled or deemed domiciled individuals who are not resident in the United Kingdom in the 2025/26 tax year and do not return to the United Kingdom. These rules are complex, and, where applicable, advice should be taken.

UK situated assets are always within the scope of UK IHT, irrespective of an individual’s domicile or residence status, so LTR status is only relevant to any exposure on non-UK situated assets. UK assets include UK residential property (and some loans and collateral used in connection with UK residential property) and following the 2025 Budget this is extended to UK agricultural land and buildings from 6 April 2026, even if owned via a non-UK company.

Non-UK situated assets owned by someone who is not an LTR are ‘excluded property’ for IHT purposes and will not form part of that individual’s UK IHT estate.

Prior to 6 April 2025, non-UK domiciled individuals were only charged to IHT on chargeable lifetime transfers of UK assets or assets situated in the United Kingdom on their death, including UK residential property (and some loans and collateral used in connection with UK residential property), even if owned via a non-UK company. As announced in the Autumn Budget 2024, the taxation of non-UK domiciled individuals has changed from 6 April 2025, and this section describes the current rules only. Advice needs to be taken if overseas funds are used as collateral for loans brought to the United Kingdom or in connection with UK residential property. See Property taxes below.  

Usually, spouses and civil partners have unlimited spouse exemption in respect of assets passing between them during lifetime and on death, so no IHT arises on such gifts. 

However, the spouse exemption is limited to GBP 325,000 in respect of gifts from a UK LTR individual to their non-UK LTR spouse or civil partner. There is no limit in respect of assets passing from a non-UK LTR spouse/civil partner to a UK-LTR spouse/civil partner or where both spouses/civil partners have the same LTR status.

Individuals who are non UK-LTR who have a UK-LTR spouse or civil partner can elect to be treated as if they were an LTR in the United Kingdom for the purposes of IHT. All the consequences of such an election must be considered, and advice should be taken.

Property taxes

Local authorities are financed partly by the imposition of council tax, which is a property-based tax levied on the occupier of a domestic dwelling at a flat rate per dwelling. Unoccupied dwellings are also taxed on the property’s owner. The remainder of local authority finance comes from the imposition of the uniform business rate on business property and from central government grants.

Taxation of UK residential property & agricultural land and buildings

IHT

‘Closely’ held non-UK companies (broadly ones owned by five or fewer shareholders) or partnerships holding UK residential property are within the charge to UK IHT, irrespective of who holds the interest. This will be extended to include UK agricultural land and buildings from 6 April 2026.

Most loans provided by individuals, trusts, closely held companies, or partnerships for the acquisition, maintenance, or enhancement of UK residential property have also been brought within the charge to IHT in the hands of the lender, as well as security provided for such loans.

This means that IHT will be chargeable in a number of additional circumstances, for example, where the individual dies whilst owning such a company's shares, where such a company's shares are gifted into or out of a trust, and on the ten-year anniversary of the trust if the trustees own shares in a non-UK resident company that in turn owns a UK property.

Register of Overseas Entities

The Register of Overseas Entities came into force in the United Kingdom on 1 August 2022 and requires all overseas entities who want to buy, sell, or transfer property or land in the United Kingdom to register with Companies House with notification of their registrable beneficial owners or managing officers.

Stamp duty land tax (SDLT), Land and buildings transaction tax (LBTT), and Land transaction tax (LTT)

Acquisitions of residential property by companies and similar non-natural persons and by individuals acquiring second homes are charged at progressive rates of up to 17% (15% pre 31 October 2024), whereas acquisitions by individuals who do not own any other properties or who are replacing their main residence are capped at 12%. The 17% or 12% rate applies to the portion of the consideration exceeding GBP 1.5 million. Companies and non-natural persons are subject to the 17% rate where the consideration exceeds GBP 500,000 and the company is not using the property for one of certain specific business purposes. An additional 2% surcharge also applies to the acquisition of residential property by non-resident purchasers, which can result in an applicable rate of up to 19%. 

Grants of residential leases in England and Northern Ireland are charged at 1% of the NPV of the rents payable in excess of GBP 125,000, plus up to 17% (or 19%) on any premium paid.

Acquisitions of residential property in Scotland are subject to Scottish land and building transactions tax (LBTT). Residential rates are graduated up to 12%, which applies for the portion of the consideration exceeding GBP 750,000. The Additional Dwellings Supplement (ADS) may also apply in respect of the purchase of second homes or buy-to-let properties, as well as certain acquisitions of residential interests by 'non-natural' persons. ADS applies to add an 8% (6% before 5 December 2024) surcharge to each consideration 'band'. LBTT is not charged on the NPV of the rents payable on the grant of a residential lease, with the exception of certain long leases treated as non-residential leases.

Acquisitions of residential property in Wales are subject to Welsh Land Transaction Tax (LTT). Residential rates are graduated up to 12%, which applies to the portion of the consideration exceeding GBP 1.5 million. The higher rates of LTT apply to add a 5% surcharge (4% before 11 December 2024) to each consideration band in respect of purchases of second homes and buy-to-lets as well as certain residential acquisitions by 'non-natural' persons.  LTT is not charged on the NPV of the rents payable on the grant of a residential lease. 

Annual tax on enveloped dwellings (ATED)

There is an ATED that applies where UK residential property is owned by a Non Natural Person (NNP). An NNP is defined as a company, partnerships with a corporate partner, and collective investment vehicles. The definitions of an NNP are aligned, as far as possible, so that the same definition applies in respect of the annual ATED charge, and SDLT.

Both UK resident and non-UK resident NNPs are within the scope of all aspects of these rules.

Trustees are not NNPs under any of these measures.

The chargeable period runs from 1 April to 31 March.

• The ATED is levied on and paid by an NNP that holds UK residential property.
• The relevant valuation date to determine whether the value is greater than GBP 500,000 is 1 April 2022 or the date of acquisition if later, to be used from 2023.
• The return and payment must be submitted to HMRC by 30 April at the start of each year.
• If a property comes within the ATED part way through the year, then a return will be required within 30 days if the NNP has acquired a chargeable interest in a dwelling, or within 90 days if because of another reason, for example the completion of conversion work.
• The return requires details of the chargeable person, the address of the property, the Land Registry title, and the self-valuation of the relevant property, among other things.
• Where residential property is part of a larger mixed-use property, only the value of the residential parts will be relevant for these purposes. There are also provisions to aggregate the value of connected party interests and to combine values where properties are linked.

The amount of the annual charge on properties valued above GBP 500,000 owned by NNPs for the current and upcoming tax years are as follows:

The ATED charges increases in line with the CPI each year and is pro-rated where the property is not held for the whole period. However, the property value bands are not indexed linked. ATED is also pro-rated when a property comes in and out of one of the reliefs during the charging period.

Luxury and excise taxes

There are no luxury and excise taxes applicable to individuals in the United Kingdom.

Stamp taxes

Stamp duty is charged at 0.5% on instruments effecting sales of shares, rounded up to the next £5. Agreements to sell shares usually attract stamp duty reserve tax (SDRT) at 0.5%. The liability to SDRT may be cancelled by paying the stamp duty due on a stock transfer form (or other transfer instrument) executed in pursuance of the agreement. Stamp duty is not usually charged on an issue of shares.

Acquisitions of residential property in England and Northern Ireland are subject to SDLT, in Scotland are subject to LBTT and in Wales are subject LTT, as outlined above in “Taxation of UK residential property”.

Acquisitions of non-residential or mixed-use property in England and Northern Ireland are charged to SDLT at graduated rates of up to 5%; the 5% rate applies for the portion of the consideration exceeding GBP 250,000. Grants of new commercial leases are chargeable to SDLT at 1% of the net present value (NPV) of the rents payable in excess of GBP 150,000 up to GBP 5 million and at 2% of the NPV in excess of GBP 5 million. SDLT is also payable at progressive rate of up to 5% on any premium paid.

Acquisition of non-residential or mixed-use property in Scotland are charged to LBTT at graduated of up to 5%; the top rate applies to the portion of the consideration exceeding GBP 250,000. Acquisitions of non-residential leases are chargeable to LBTT based on the NPV of rents over the term of the lease (calculated with reference to the first five years of the lease) as well as any premium payable. Rates are graduated up to 2% for any NPV of rents exceeding GBP 2 million. The tax due on the premium is calculated with reference to the non-residential freehold rates. A further LBTT return must be submitted on every third anniversary of the lease to take account of any changes that have taken place in the previous three years (e.g. to the rental payments) and any extensions or variations to the lease that have been agreed during that three-year period.

Acquisitions of non-residential or mixed-use property in Wales are charged to LTT at graduated rates of up to 6%; the top rate applies to the portion of the consideration exceeding GBP 1 million. The acquisition of non-residential leases is chargeable to LTT based on the NPV of rents over the term of the lease (calculated with reference to the first five years of the lease) as well as any premium payable. Rates are graduated up to 2% for any NPV of rents exceeding GBP 2 million. The tax due on the premium is calculated with reference to the non-residential freehold rates.

SDLT is subject to the application of General anti-abuse rule ("UK GAAR"), as well as s.75A FA 2003 which is a mechanical anti-avoidance provision which can apply to any scheme or series of transactions where the conditions are met. LBTT and LTT each have their own General anti-avoidance rule, which are intended to operate more widely than the UK GAAR. Each stamp taxes regime also operates targeted anti-avoidance rules in relation to specific provisions or reliefs.

Air passenger duty

Individuals leaving the United Kingdom by air are obligated to pay a duty, which in practice is invariably included in the cost of the air ticket. Rates of duty are based on a system of geographical banding and class of travel.