UK vs Australia taxes (2026): income, CGT and inheritance tax

United Kingdom vs Australia tax rates at a glance

Tax	🇬🇧 United Kingdom	🇦🇺 Australia
Income tax	Personal income tax: 20% to 45% Personal allowance: GBP 12,570 Scottish top rate: 48% Employee National Insurance: 8% Employer National Insurance: 15%	Tax-free threshold: AUD 18,200 Next band: 16% Middle band: 30% Upper band: 37% Top rate: 45% Medicare levy: 2%
Corporate tax	Corporation tax: 25% Small profits rate: 19% Marginal relief band: GBP 50,000 to GBP 250,000 VAT: 20%	Base-rate entity rate: 25% General company rate: 30% Franking credits: Available GST: 10%
Capital gains tax	Annual exempt amount: GBP 3,000 Basic rate CGT: 18% Higher and additional rate CGT: 24% Business Asset Disposal Relief: 18%	Inclusion method: Marginal rates Individual discount: 50% after 12 months Effective top individual rate on discounted gain: About 22.5% before levy Company treatment: Generally no discount
Dividend tax	Dividend allowance: GBP 500 Basic rate dividend tax: 10.75% Higher rate dividend tax: 35.75% Additional rate dividend tax: 39.35% Withholding tax on ordinary dividends: 0%	Resident taxation: Marginal rates Franking credit benefit: Offsets company tax paid Domestic non-resident WHT: Often 30% on unfranked Treaty rates: Often lower
Wealth tax	Net wealth tax: 0% Inheritance tax: 40% Capital gains tax: 24% ATED scope: GBP 500,000+	Net wealth tax: 0% Annual federal asset tax: 0% Land tax / stamp duty: State rules apply
Inheritance / estate tax	Standard inheritance tax: 40% Nil-rate band: GBP 325,000 Residence nil-rate band: GBP 175,000 Lifetime gifts: Potentially 0% to 40%	Estate / inheritance tax: 0% General gift tax: 0% Super death benefits: Can apply Later CGT on inherited assets: Possible
VAT / GST / sales tax	VAT: 20%	GST: 10%
Standard VAT / GST	20%	10%
Inheritance / estate tax	40% IHT for long-term UK residents	No federal inheritance tax

Who wins on each tax

Personal income taxTie

Both top out at 45% before extras: UK National Insurance and Scottish 48% on one side, Australia's 2% Medicare levy on the other.

Corporate taxUnited Kingdom

UK corporation tax is 19% on small profits and 25% on the main rate, below Australia's 25% base-rate entity and 30% general company rates.

Capital gains taxUnited Kingdom

UK individuals pay 18% or 24% from 6 April 2026 after a GBP 3,000 annual exempt amount. Australia taxes gains at marginal rates, commonly with a 50% discount after 12 months.

GST / VATAustralia

Australia's GST is 10%, compared with UK VAT at 20%.

Inheritance taxAustralia

Australia has no federal inheritance tax. Long-term UK residents can face 40% IHT on worldwide assets above the nil-rate bands.

The verdict

Headline personal rates sit close together. The UK reaches 45% outside Scotland and 48% in Scotland, with National Insurance on employment. Australia reaches 45% plus a 2% Medicare levy. Neither is a light place to take a salary.

The estate contrast is sharper. From 6 April 2025 the UK uses a long-term residence test for inheritance tax, so people who have been UK-resident for long enough can have worldwide assets in the 40% IHT net. Australia has no federal inheritance or estate tax, though superannuation death benefits and later CGT on inherited assets can still arise.

Choose Australia if succession and GST matter more than London market access. Choose the UK when English-law finance, a 19% small-profits company rate or a four-year foreign-income-and-gains claim after ten years outside the UK is the real planning point. Residence, treaty and UK-source work still need modelling.

How to read this comparison

The United Kingdom and Australia both tax residents on worldwide income and both put a 45% headline on high personal earnings. The useful comparison is not “which country is low tax”. It is which extra layer you are willing to live with.

On employment, National Insurance in the UK and the 2% Medicare levy in Australia both sit on top of income tax. A founder taking a large salary will feel expensive in either place. Company profits split more cleanly. The UK’s 19% small-profits rate and 25% main rate undercut Australia’s 25% base-rate entity and 30% general company rates. Shareholder outcomes then diverge again: UK dividends from April 2026 are 10.75%, 35.75% or 39.35% above a GBP 500 allowance, while Australia uses franking credits so company tax can be credited to the resident shareholder.

Capital gains are closer than the labels suggest. From 6 April 2026 UK individuals generally pay 18% or 24% after a GBP 3,000 annual exempt amount. Australia folds gains into income tax, often with a 50% discount after 12 months, so a top-rate individual can still face a high effective charge. Indirect tax is simpler: Australian GST is 10% and UK VAT is 20%.

The estate point is the one that should stop a long-stay decision being made on income tax alone. The UK charges 40% inheritance tax above frozen nil-rate bands, and long-term UK residents can bring worldwide assets into that charge. Australia abolished death duties. That does not make an Australian estate administratively free — superannuation death benefits and later CGT still appear — but it is not a 40% worldwide inheritance tax. A qualifying new UK resident may claim the four-year foreign-income-and-gains regime after ten years outside the UK. That relief does not rewrite IHT for someone who later becomes a long-term UK resident.

Which one fits you

🇬🇧 Choose United Kingdom if you're a…

Founders who want the UK 19% small-profits company rate
People who need London finance, courts or English-law infrastructure
New UK residents who can claim the four-year foreign-income-and-gains regime

🇦🇺 Choose Australia if you're a…

Families who want to avoid a 40% worldwide inheritance-tax net
Residents who prefer 10% GST over 20% VAT
Businesses whose customers and workforce are in Australia

Frequently asked questions

Is the UK or Australia better for tax?

It depends on the tax. The UK is often lighter for company profits and a listed-style capital-gains rate. Australia is usually better for GST and for families who would otherwise sit in the UK's 40% inheritance-tax net.

Does Australia have inheritance tax?

No federal inheritance or estate tax applies. Superannuation death benefits paid to non-dependants and later capital gains on inherited assets can still create tax after death.

Does the UK tax worldwide estates?

Long-term UK residents can have worldwide assets in scope for 40% inheritance tax. From 6 April 2025 the test is long-term UK residence rather than the old domicile language. Thresholds and reliefs still apply.

Can a new UK resident shelter foreign income?

A qualifying person in the first four years of UK tax residence after at least ten consecutive non-UK tax years can claim relief for eligible foreign income and gains. Eligibility and the loss of allowances need checking.

United Kingdom vs Australia taxes