UK
Financial Year – 6 April – 5 April (individuals), 1 April – 31 March (companies)
Currency – Pound sterling (GBP)
Corporate Tax Summary
Residence – A company is UK resident if it is incorporated in the UK or its place of central management and control is in the UK.
Basis of Taxation – Resident companies are taxed on worldwide income and gains with credit given on any foreign tax incurred. A non-resident company will be liable to UK corporation tax only if it carries out trade through a permanent establishment in the UK or is in receipt of income and gains from UK real estate. Tax rates and treatment are the same for companies and branches of foreign companies.
| Reference | ||
| Corporate Income Tax Rate (%) | 25% | From 1 April 2023, The main rate of corporation tax is 25%. A small profits rate of 19% is applicable to companies with profits up to £50,000. Profits between £50,000-£250,000 are taxed at a marginal rate of 26.5%. The profit limits are reduced for a company with associated companies. |
| Branch Tax Rate (%) | 25% | The main rate and small profits rate are as above. |
| Withholding Tax Rate: | ||
| Dividends – Franked | 0% | A withholding tax of 20% will apply on dividends paid to non-resident companies on Property Income Dividends (PIDs) for Real Estate Investment Trusts (REITs) and Property Authorised Investment Funds (PAIFs). |
| Dividends – Unfranked | 0% | |
| Dividends – Conduit Foreign Income | 0% | |
| Interest | 20% | Interest paid to individuals or non-resident companies is subject to 20% withholding tax, unless the withholding tax rate is reduced or eliminated under a double taxation treaty. |
| Royalties from Intellectual Property | 20% | Royalties paid to individuals or non-resident companies are subject to 20% withholding tax, unless the withholding tax rate is reduced or eliminated under a double taxation treaty. |
| Fund Payments from Managed Investment Trusts | 0% | |
| Branch Remittance Tax | 0% | |
| Net Operating Losses (Years) | ||
| Carry back | 12 months | |
| Carry forward | Indefinite (or group relieved) | Carry forward losses can be offset in full up to the level of the company’s deduction allowance. This allowance for an accounting period is up to £5million per group and is reduced for accounting periods of less than 12 months. After the allowance, profits can only be relieved by up to 50% using the carry forward losses. |
Individual Tax Summary
Residence – Taxpayers who are resident in the UK in a tax year are taxable on their worldwide income and capital gains arising that year, while taxpayers who are NOT resident in the UK in a tax year are only taxable on their UK income arising in that year (their foreign income is not taxed). Subject to limited exceptions (such as disposals of UK real estate), non-residents do not pay capital gains tax.
The residence of an individual is determined according to the Statutory Residence Rules.
Basis of Taxation – UK resident taxpayers are taxed on their worldwide income and gains, with a tax credit available for the foreign tax paid on foreign income, up to the amount of UK tax payable on that income. Non UK tax residents are taxed only on their UK-source income. Residents who qualify as non UK domicile may elect to be taxed under the remittance basis of taxation to include only non UK sources of income remitted to the UK.
The current non UK domicile remittance basis regime will be abolished and replaced with a new Foreign Income and Gains (FIG) regime from 6 April 2025. Legislation is yet to be implemented but the draft legislation states that all foreign income and gains are exempt from UK taxation during the first four years of residency, as long as the individual has not been resident in the UK in any of the previous ten tax years.
Unlike the remittance basis, the foreign income and gains can be remitted or enjoyed in the UK without any tax charge. After the four-year period has ended, individuals will be subject to UK tax on their worldwide income and gains.
Filing Status – Each taxpayer must file a separate return each financial year; joint returns are not permitted.
Personal Income Tax Rates
| Taxable Income | Tax Rates |
| £0 – 37,700 | 20% |
| £37,701 – 125,140 | 40% |
| Above £125,140 | 45% |
UK resident individuals are also entitled to a personal allowance whereby the first £12,570 of taxable income is taxed at 0%. This allowance is tapered away by £1 for every £2 of taxable income over £100,000. Non-UK residents may be entitled to a personal allowance depending on their circumstances.
In addition to personal income tax, individuals will be subject to National Insurance contributions of 6% on trading profits above £12,570 and up to £50,270 and 2% above £50,270.
Goods and Services Tax (GST)
| Rate | 20% (5% reduced rate) |
| Taxable Transactions | Value Added Tax applies to most sales of goods, the provision of services and imports. |
| Registration | Registration is compulsory for businesses whose taxable supplies exceed £90,000 in a cumulative 12-month period or where a business expects that its taxable supplies will exceed this threshold within the next 30 days. Voluntary registration is possible for businesses making taxable supplies below this threshold. If classed as a non-established taxable person (NETP) and supply goods or services to the UK, then might need to register for UK VAT, even if trade below the registration threshold. |
| Filing and Payment | VAT returns are generally due on a quarterly basis, although monthly and annual submissions are allowed. A surcharge may be imposed for late filing or payment of VAT. |
Other Taxes Payable
| Tax | Reference |
| Payroll Tax | Employers are required to withhold tax on employees earnings under PAYE and employers and employees National Insurance contributions. |
| Stamp Duty | Stamp Duty Reserve Tax at 0.5% applies on the transfer of UK shares and is payable by the transferee. |
| Land Tax | Stamp Duty Land Tax is charged on transfers of property (residential and commercial). For residential properties the SDLT rates are between 0% and 12% depending on the value of the property (rates increased by 3% where further property acquired). The rates for commercial property are 0% to 5% and a 15% rate applies to purchases of residential properties of more than £500,000 by non-natural persons unless a relief applies. |
Last updated: 13.09.2024