Tax system in United Kingdom
UK tax is layered. Individuals pay income tax on wages, self-employment, rental income, pensions and savings, while companies pay corporation tax on profits, and estates can face inheritance tax on death or on certain lifetime transfers.
The headline personal allowance is GBP 12,570 for 2026/27. Dividend income gets a separate GBP 500 allowance, and Scotland uses separate non-savings and non-dividend income tax rates.
VAT is 20% in most cases, employer National Insurance is 15%, and Making Tax Digital for Income Tax starts in April 2026 for many sole traders and landlords with qualifying income above GBP 50,000.
Tax rates at a glance
- Income tax
- 45% / 48% ScotlandProgressive
- Wealth tax
- 0%
- Inheritance tax
- 40%
- Capital gains tax
- 24%
- Corporate tax
- 25% (19% small profits)
- Dividend tax
- 10.75% / 35.75% / 39.35%
- VAT
- 20%
Who benefits most
These profiles tend to benefit most when the rules match their real residence, payroll and business setup.
EmployeesFoundersInvestorsProperty ownersExpats
Watch out for
- Scotland has different income tax bands and rates for wages, pensions and most other non-savings income, so UK income tax is not one single national table.
- Inheritance Tax thresholds are frozen through 2030/31, and the rules moved to a long-term UK residence test from 6 April 2025.
- The UK is not a low-tax jurisdiction once VAT, payroll National Insurance and capital taxes are included.
Frequently asked questions
Is the United Kingdom a high-tax country?
Yes. The UK has a broad tax base with income tax, National Insurance, VAT, corporation tax, capital gains tax and inheritance tax. The exact burden depends on your residence, income mix and whether you are an employee, founder or investor.
Does the UK have a wealth tax?
No. The UK does not levy a general annual net wealth tax, but asset owners can still face CGT, IHT, ATED, stamp duty and council tax.
What should founders watch first?
For founders, the big items are corporation tax, VAT, employer National Insurance, dividend planning and whether Making Tax Digital or payroll registration applies.