UNITED KINGDOM TAX REPORT 2025 / 2026

The UK tax landscape undergoes a major overhaul on April 6, 2025. The government has abolished the non-dom regime and increased rates for employers and investors. Review this full report for the 2025/2026 tax year.

PERSONAL INCOME TAX (England, Wales, N. Ireland)

The Personal Allowance remains frozen. You pay tax on income exceeding £12,570.

• Personal Allowance: 0% on the first £12,570.

• Basic Rate (20%): £12,571 to £50,270.

• Higher Rate (40%): £50,271 to £125,140.

• Additional Rate (45%): Over £125,140.

Note: The dividend allowance is £500. You pay tax on dividends above this amount at 8.75% (Basic), 33.75% (Higher), or 39.35% (Additional).

NATIONAL INSURANCE (NI)

Employer costs have risen significantly. Employee rates remain stable.

• Employer Rate: Increased to 15% (from 13.8%).

• Employer Threshold: Reduced to £5,000 per employee per year. You start paying NI on salaries above this level.

• Employment Allowance: Increased to £10,500. This helps small businesses offset the rising costs.

• Employee Rate (Class 1): 8% on earnings between £12,570 and £50,270. 2% on earnings above £50,270.

CAPITAL GAINS TAX (CGT)

Rates have increased for all assets. The separate lower rates for shares are gone. Rates are now aligned with residential property rates.

• Annual Exempt Amount: £3,000.

• Basic Rate Taxpayers: 18% (Increased from 10%).

• Higher Rate Taxpayers: 24% (Increased from 20%).

• Business Asset Disposal Relief (BADR): Rate increased to 14% (Effective April 6, 2025). The lifetime limit remains £1 million.

NON-DOM REGIME ABOLITION

The "non-dom" status is abolished effective April 6, 2025. The remittance basis of taxation has ended.

• New Residents (FIG Regime): New arrivals to the UK enjoy a 4-year exemption on Foreign Income and Gains (FIG). You pay no UK tax on foreign funds brought into the UK during this period.

• Long-Term Residents: If you have lived in the UK for more than 4 years, you pay UK tax on your worldwide income and gains.

• Inheritance Tax: A residence-based system replaces the domicile-based system. You generally fall within the IHT net after 10 years of UK residence.

PROPERTY AND FURNISHED HOLIDAY LETS (FHL)

The FHL tax regime is abolished effective April 2025.

• Income Tax: FHL income is now treated as standard property income. You can no longer deduct full mortgage interest. You receive a 20% tax credit instead.

• Capital Gains: Sales of former FHL properties no longer qualify for the 14% BADR rate (unless specific transitional rules apply). Standard CGT rates of 18% or 24% apply.

• Stamp Duty (SDLT): The surcharge for additional dwellings remains 5%.

CORPORATION TAX

The main rate remains at 25%.

• Main Rate: 25% (Profits over £250,000).

• Small Profits Rate: 19% (Profits under £50,000).

• Marginal Relief: Applies to profits between £50,000 and £250,000.

VALUE ADDED TAX (VAT)

The government now applies VAT to private education.

• Standard Rate: 20%.

• Private School Fees: 20% VAT applies to all school fees.

• Registration Threshold: £90,000.

COMPLIANCE DEADLINES

• Self Assessment Filing: January 31 (Online).

• Capital Gains Reporting (Property): Report and pay within 60 days of sale.

• Corporation Tax Payment: 9 months and 1 day after the accounting period ends.