United Kingdom Tax Regime

The United Kingdom levies income tax, corporation tax, capital gains tax (CGT) and inheritance tax (IHT), all administered by HM Revenue & Customs (HMRC). Residents are taxed on worldwide income and gains. The long-standing remittance basis for non-domiciled individuals was replaced, from April 2025, by a residence-based foreign income and gains (FIG) regime giving relief for a new arrival's first four years — confirm the current rules.

Companies are resident if incorporated in the UK or centrally managed and controlled there. The individual tax year runs to 5 April; companies use their own accounting periods.

1.1 Sources of law and treaties

The tax code is statutory (the Corporation Tax Acts, Income Tax Acts, TCGA and IHTA), supplemented by HMRC manuals and case law. The UK has one of the world's largest treaty networks, overlaid by the OECD multilateral instrument.

2.1 Residence and scope

A company is UK-resident if incorporated in the UK or centrally managed and controlled there; residents are taxed on worldwide profits. Non-residents are taxed on UK trading profits attributable to a permanent establishment and, increasingly, on UK property income and gains.

Where a non-resident trades through a UK branch, branch profits are within the charge to corporation tax.

2.2 Rates

The main corporation tax rate is 25%, with a 19% small-profits rate for profits below £50,000 and marginal relief between £50,000 and £250,000. Sector surcharges apply to banks and to oil-and-gas and (temporarily) energy profits.

Per published tax references framing; verify time-sensitive items. As-of June 2026.

2.3 Dividends, integration and participation

The UK abolished dividend imputation long ago and instead largely exempts dividends received by companies, so profits move up a group with little further tax. There is no classic participation exemption for gains, but the substantial shareholding exemption (SSE) exempts gains on qualifying disposals of 10%-or-greater trading-company shareholdings.

At shareholder level, individuals are taxed on dividends at their own (lower) dividend rates after a small allowance.

2.4 Income determination and cost recovery

Trading profits follow the accounts adjusted for tax. Capital expenditure is relieved through capital allowances, including full expensing — a 100% first-year allowance on qualifying new plant and machinery — and the annual investment allowance for smaller spend; there is generally no relief for the cost of land and most buildings beyond the structures-and-buildings allowance.

2.5 Losses and groups

Group relief allows losses to be surrendered between 75% group companies, and assets move within a capital-gains group on a no-gain/no-loss basis. Loss reform restricts the offset of carried-forward losses to 50% of profits above a £5 million group allowance.

2.6 Incentives

Innovation is supported by a merged R&D expenditure-credit scheme, with enhanced support for R&D-intensive SMEs, and the Patent Box, which taxes profits from patented inventions at an effective 10%. Creative-sector expenditure credits, the REIT regime and freeport/investment-zone allowances round out the incentive set.

2.7 Compliance

Companies self-assess and pay corporation tax nine months and one day after the period end (quarterly instalments for large companies), filing the CT600 within twelve months. Penalties apply for late filing and inaccuracies.

3.1 Residence and rates

Residence is determined by the Statutory Residence Test. Income tax is charged at 20%, 40% and 45% (Scotland sets its own rates and bands), and the personal allowance is tapered away above £100,000. National Insurance contributions apply to earnings.

Per published tax references framing; verify time-sensitive items. As-of June 2026.

3.2 Types of income

Employment income (collected at source through PAYE), trading and property income, savings and dividend income, and capital gains are each taxed, often on their own rate bases. Dividends carry their own rates and a small allowance, and savings income benefits from a personal savings allowance.

3.3 Deductions, reliefs and tax-favoured saving

Reliefs are relatively targeted: pension contributions attract relief at the marginal rate up to a £60,000 annual allowance, ISAs allow £20,000 per year of tax-free saving, and the EIS, SEIS and VCT schemes give income-tax relief and CGT advantages for investing in qualifying small companies.

3.4 Capital gains

Capital gains tax applies at 18% and 24% after recent rate changes, following an annual exempt amount. Business Asset Disposal Relief gives a reduced rate on qualifying business disposals up to a £1 million lifetime limit, with a separate Investors' Relief allowance.

3.5 Wealth, estate and other personal taxes

There is no annual wealth tax. Inheritance tax applies at 40% above the nil-rate band, with reliefs for business and agricultural property; the move to a residence-based regime has changed the IHT exposure of internationally mobile individuals.

3.6 Compliance

Taxpayers within self-assessment file online by 31 January after the tax year, with the balance due the same day and payments on account during the year; most employees are taxed entirely through PAYE and fall outside self-assessment.

4.1 Withholding and treaties

The UK imposes no withholding on dividends and 20% on many interest and royalty payments, reduced or eliminated by treaty. The diverted profits tax targets contrived arrangements that avoid a UK taxable presence.

4.2 Anti-deferral (CFC) rules

A controlled-foreign-company regime can attribute the profits of low-taxed foreign subsidiaries to a UK parent, with entity- and gateway-level exemptions for genuine commercial activity.

4.3 Transfer pricing

Transfer pricing follows the OECD guidelines, with documentation requirements and country-by-country reporting for large groups; a related diverted-profits charge backs it up.

4.4 Interest limitation

The corporate interest restriction caps net interest deductions at 30% of tax-EBITDA above a £2 million threshold, with a group-ratio election and carryforwards, in addition to longstanding transfer-pricing and unallowable-purpose tests.

4.5 Exit and departure taxation

Companies migrating their residence out of the UK face an exit charge on unrealised gains, and temporary-non-residence rules can claw back tax on gains and certain income realised by individuals during a short period abroad.

5.1 Assessment and limitation

HMRC opens enquiries within fixed windows and can raise discovery assessments where information was not disclosed; the general assessment time limit is four years, extended for carelessness and deliberate behaviour.

5.2 Anti-avoidance

A statutory general anti-abuse rule (GAAR), the DOTAS disclosure regime, the diverted profits tax and numerous targeted anti-avoidance rules constrain planning, supported by penalties for enablers of defeated avoidance.

5.3 Disputes and rulings

Disputes are reviewed internally and appealed to the First-tier Tribunal (Tax), with onward appeals to the Upper Tribunal, the Court of Appeal and the Supreme Court; alternative dispute resolution and non-statutory clearances are available.

Indirect and transaction taxes round out the regime.

Other taxes

Figures per published tax references framing; verify time-sensitive items. As-of June 2026.

Principal annual filing and payment obligations. Dates are indicative and subject to extensions and remitter-category rules — verify the current deadlines.

Indicative deadlines; confirm current dates, instalment thresholds and extension rules. As-of June 2026.

Compiled from published tax references. As-of June 2026. Verify all figures against the source and current law before use.