The UK taxes residents on worldwide income (the historical remittance basis for non-UK-domiciled residents on foreign income and gains was replaced by a new residence-based foreign income and gains regime effective from the 2025/26 tax year - see Residency above) and non-residents on UK-source income only. The UK operates a Self Assessment system (the literal name of HMRC's own regime), adopted in 1996-97 per IMF research - one of the more recent OECD adopters - though most employees with straightforward PAYE-withheld wage income are not required to file a Self Assessment return at all, since PAYE withholding by the employer settles their liability in full.
The UK tax year runs 6 April to 5 April (not the calendar year). The Self Assessment online filing deadline is 31 January following the end of the tax year; payments on account for the current year are due 31 January and 31 July. HMRC does not typically grant extensions to the Self Assessment deadline.
The main rate of UK corporation tax is 25%, applying to companies with profits over GBP 250,000. A small profits rate of 19% applies below GBP 50,000, with marginal relief tapering the rate between the two thresholds. Resident companies are taxed on worldwide profits; non-resident companies are taxed on UK-source trading profits, UK permanent establishment profits, and UK property income and gains.
UK resident individuals (outside Scotland) pay income tax on a banded system after a GBP 12,570 personal allowance, which tapers to zero once adjusted net income exceeds GBP 125,140.
Scotland sets its own income tax bands and rates, which differ from the rest of the UK. Dividend and savings income are taxed under separate rate schedules.
The UK standard VAT rate is 20%, with a reduced 5% rate for specific goods and services (such as domestic energy) and a zero rate for items including most food and children's clothing. VAT registration is mandatory once UK taxable turnover exceeds GBP 90,000 in a rolling 12-month period; voluntary registration is available below that threshold. Since Brexit, the UK operates VAT independently of the EU VAT area, with distinct import VAT and postponed accounting rules for goods entering Great Britain.
UK tax residency is determined under the Statutory Residence Test (SRT), which weighs days spent in the UK against a set of connecting factors (family, work, accommodation, and prior-year presence). There is no fixed single day-count threshold; someone can become resident anywhere from 16 to 183 days present, depending on how many ties they have to the UK. Domicile is a separate, historically rooted concept that historically affected the taxation of foreign income and gains for UK residents; the remittance basis regime for non-UK-domiciled individuals was replaced by a new residence-based foreign income and gains regime effective from the 2025/26 tax year.
A non-UK resident company has a UK permanent establishment through a fixed place of business in the UK, or through a UK-based agent (other than an independent agent acting in the ordinary course of business) who habitually exercises authority to conclude contracts on the company's behalf - broadly following the OECD Model Treaty definition, subject to the terms of any applicable UK tax treaty.
The UK's Controlled Foreign Company rules (Taxation (International and Other Provisions) Act 2010, Part 9A) apply to UK-resident corporate taxpayers: they attribute certain low-taxed profits of non-UK resident companies controlled by a UK company back to that UK corporate parent, subject to a series of gateway tests and exemptions (including low-profit, low-profit margin, and tax-exemption thresholds). The regime targets profits diverted from the UK rather than imposing a blanket attribution of all foreign subsidiary income. UK individuals owning foreign companies directly (with no UK corporate entity in the ownership chain) are not covered by Part 9A CFC rules, though other UK anti-avoidance provisions (such as the Transfer of Assets Abroad rules) can apply to individuals in comparable situations.
The UK does not use a fixed debt-to-equity thin cap ratio. Instead, interest deductibility is governed by transfer pricing arm's-length principles and the Corporate Interest Restriction (CIR) regime, which generally caps net UK interest deductions at the higher of 30% of UK tax-EBITDA or a fixed GBP 2 million de minimis, subject to a group ratio alternative.
The UK enacted anti-hybrid mismatch rules (Taxation (International and Other Provisions) Act 2010, Part 6A, implementing OECD BEPS Action 2) that counteract double deductions and deduction/non-inclusion outcomes arising from hybrid entities and instruments. A well-documented real-world trigger: where a UK entity (commonly a UK LLP or UK company used as a fund sub-manager) is treated as tax-transparent ("disregarded") for US tax purposes via a US check-the-box election, the same expense can become deductible in both the UK and the US, and HMRC's anti-hybrid rules can deny the UK-side deduction to counteract that double deduction.
The UK does not have a domestic FBAR-equivalent foreign account reporting regime for UK residents; UK residents disclose foreign income and gains through the standard Self Assessment return rather than a separate account-existence or balance-based disclosure filing.
The UK provides a broad exemption for most dividends received by UK companies from other companies (foreign or domestic) under the dividend exemption regime introduced in 2009, covering most commercially-motivated dividend receipts without a strict minimum ownership threshold for many categories, though certain anti-avoidance conditions and specific exempt classes apply. Capital gains on the disposal of shares can separately qualify for the Substantial Shareholding Exemption (SSE), broadly requiring at least 10% ownership held for a continuous 12-month period within the prior 6 years.
The UK has a real foreign tax credit regime (Foreign Tax Credit Relief) available to both individuals and companies, under an applicable tax treaty or UK unilateral relief where no treaty exists. As an alternative, a taxpayer can elect to deduct the foreign tax from the taxable amount rather than claim a credit, where that produces a better result. Individuals report and claim the relief on the SA106 Foreign supplementary pages to the Self Assessment return.
The UK maintains one of the largest double tax treaty networks in the world, with more than 130 comprehensive treaties in force. Treaties generally reduce withholding rates on dividends, interest, and royalties, and provide relief from double taxation and mutual agreement procedures for disputes.