UK vs Japan taxes (2026): inhabitant tax, IHT and company rates

United Kingdom vs Japan tax rates at a glance

Tax	🇬🇧 United Kingdom	🇯🇵 Japan
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%	National income tax: 5% - 45% Highest bracket tax: 45% Inhabitant tax: 4% + 6% Reconstruction surtax: 2.1% of income tax Non-resident salary: 20.42% Employment-income deduction: ¥650,000 minimum Individual enterprise tax: 3% - 5% Very-high-income additional rule: 22.5% comparison rate
Corporate tax	Corporation tax: 25% Small profits rate: 19% Marginal relief band: GBP 50,000 to GBP 250,000 VAT: 20%	Standard national corporation tax: 23.2% Qualifying SME first ¥8 million: 15% Certain high-income SMEs first ¥8 million: 17% Large-company effective rate: 30.64% Qualifying SME effective bands: 21.94% / 23.73% / 34.43% Pillar Two minimum: 15%
Capital gains tax	Annual exempt amount: GBP 3,000 Basic rate CGT: 18% Higher and additional rate CGT: 24% Business Asset Disposal Relief: 18%	Listed securities: 20.315% Long-term land and buildings: 20.315% Short-term land and buildings: 39.63% Cryptoassets: Progressive income rates Main-home special deduction: Up to ¥30 million
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%	Listed shares below 3%: 20.315% Unlisted shares: 20.42% Listed shares at or above 3%: 20.42% National portion on listed shares: 15.315% Local portion on listed shares: 5% NISA dividends: 0%
Wealth tax	Net wealth tax: 0% Inheritance tax: 40% Capital gains tax: 24% ATED scope: GBP 500,000+	Personal net wealth tax: 0% Fixed asset tax: 1.4% City planning tax: Up to 0.3% Business-office tax: ¥600 / m² + 0.25% payroll
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%	Inheritance tax range: 10% - 55% Basic exemption: ¥30m + ¥6m × statutory heirs Statutory share up to ¥10m: 10% Statutory share ¥100m - ¥200m: 40% Statutory share ¥300m - ¥600m: 50% Statutory share above ¥600m: 55% Spouse credit: ¥160m or legal share Annual gift exemption: ¥1.1 million
VAT / GST / sales tax	VAT: 20%	Consumption tax: 10% / 8%
Other key taxes	None listed on country overview	Special reconstruction surtax: 2.1% of income tax Inhabitant tax: About 10%
Local personal layer	National Insurance on employment	Inhabitant tax about 10%
Inheritance tax	40%	10% - 55%

Who wins on each tax

Personal income taxUnited Kingdom

Both national tops are 45%, but Japan's inhabitant tax of about 10% and reconstruction surtax usually make the combined personal burden heavier than UK income tax plus National Insurance at many salary levels.

Corporate taxUnited Kingdom

UK corporation tax is 19% or 25%. Japan's national rate is 23.2%, with combined effective rates often around 29.74% before the 2026 defense surcharge.

Capital gains taxUnited Kingdom

UK individuals pay 18% or 24% from 6 April 2026. Japan commonly taxes listed-security gains at 20.315% and uses higher rates on short-term real estate.

Consumption tax / VATJapan

Japan's consumption tax is 10% (8% reduced). UK VAT is 20%.

Inheritance taxUnited Kingdom

UK IHT is a flat 40% above thresholds. Japan ranges from 10% to 55% and can be heavier on large estates even after the statutory-heir exemption.

The verdict

Both national personal scales reach 45%. Japan then adds a 2.1% reconstruction surtax on income tax and inhabitant tax of about 10%. The UK adds National Insurance on employment and a 48% Scottish top rate on non-savings income. A Japanese salary is rarely the 45% headline on its own.

Succession is the sharper split. Japan inheritance tax runs from 10% to 55% after a basic exemption of ¥30 million plus ¥6 million per statutory heir, and it can cover worldwide assets in many residence and nationality cases. UK inheritance tax is 40% above the nil-rate bands, with worldwide assets in scope for long-term UK residents.

Choose the UK for a more predictable 18%/24% individual CGT rate and a 25% main company rate. Choose Japan when the domestic market, family ties or employment are the reason to be there. Inhabitant tax, social insurance and inheritance exposure should be modelled before treating Japan as 'the same 45% as the UK'.

How to read this comparison

Japan and the United Kingdom both look like 45% personal-tax countries on a one-line table. The extras are what you actually pay.

Japan’s national income tax runs from 5% to 45%, with a 2.1% reconstruction surtax on the income-tax amount. Inhabitant tax is a separate local charge of about 10%, generally based on the previous year’s income for someone with a Japanese domicile or similar connection on 1 January. Employment-income deductions and social insurance change the net. The UK uses 20%, 40% and 45% in England, Wales and Northern Ireland, 48% at the top in Scotland, a GBP 12,570 personal allowance, and National Insurance on employment. Neither system is a flat professional rate.

Company tax favours the UK on the published stack. UK corporation tax is 19% on small profits and 25% on the main rate. Japan’s national corporation-tax rate is 23.2%, with local corporate taxes on top and illustrative combined rates around 29.74% before the 2026 defense surcharge. Listed-security gains in Japan are commonly 20.315%. UK individuals pay 18% or 24% from 6 April 2026 after a GBP 3,000 annual exempt amount. Japan’s consumption tax at 10% (8% reduced) is the one clear indirect-tax win against UK VAT at 20%.

Inheritance is where families should slow down. UK IHT is 40% above a GBP 325,000 nil-rate band and a possible GBP 175,000 residence nil-rate band, with worldwide assets in play for long-term UK residents. Japan’s table runs from 10% to 55% after ¥30 million plus ¥6 million per statutory heir, and the 55% band is a real rate on large deemed shares. A spouse credit can zero a large part of a surviving spouse’s inheritance, which has no exact UK equivalent. A four-year UK foreign-income-and-gains claim may help a new UK resident after a decade abroad. It does not solve Japanese inhabitant tax or a 55% Japanese inheritance band.

Which one fits you

🇬🇧 Choose United Kingdom if you're a…

Founders comparing 25% UK corporation tax with Japan's higher combined company stack
Investors who want 18%/24% CGT rather than Japan's asset-class mix
Families modelling a 40% IHT cap against Japan's 55% top band

🇯🇵 Choose Japan if you're a…

People whose work or customers are in Japan
Households that benefit from Japan's spouse inheritance credit
Residents who prefer 10% consumption tax to 20% VAT

Frequently asked questions

Is Japan or the UK higher tax?

Japan is often higher once inhabitant tax and the reconstruction surtax are included, and its inheritance tax can exceed the UK's 40% on large estates. The UK has higher VAT at 20% versus Japan's 10% consumption tax.

What is Japanese inhabitant tax?

It is a separate local tax, typically about 10% in total (4% prefectural and 6% municipal), assessed mainly on the prior year's income for people with a domicile or similar connection in Japan on 1 January.

How do the inheritance taxes compare?

The UK charges 40% above the nil-rate bands and can include worldwide assets for long-term residents. Japan uses 10% to 55% after a ¥30 million plus ¥6 million per statutory heir exemption, with a substantial spouse credit.

Does the UK offer new-resident relief that Japan lacks?

A qualifying UK newcomer can claim the four-year foreign-income-and-gains regime after ten consecutive non-UK tax years. Japan has its own non-permanent resident rules, which are a different design and should not be treated as the same relief.

United Kingdom vs Japan taxes