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Taxes in England: Which should I pay?
Find out the taxes in England for expats in 2025 — whether you work or start your own business.
The UK has one of the oldest tax systems in the world and taxes in England are collected by HM Revenue & Customs (HMRC). Thanks to citizens’ contributions, public services such as healthcare, education, and social security are funded.
As an interesting fact, Prime Minister William Pitt introduced the first income tax in 1799 to fund the war against Napoleon.
Stay with us in this post to learn about the main taxes you will have to pay as an individual or business in 2025. If you’re thinking about living in this country for a while or setting up a business, we will explain which taxes will apply to you and how to plan your finances.
Taxes for individuals in England
Individuals are those who work for others, students, freelancers, or digital nomads who can work remotely from the country thanks to the UK’s nomad visa.
In summary, any individual who is not part of a company or association and has rights and obligations on their own. We outline the main taxes for this group of people in England:
Income Tax
One of the direct and progressive taxes in England is the one on personal income, such as salary, pensions, rental income, or any self-employed benefits. The rates are applied based on income brackets:
- 0% rate: up to $15,870 USD (€14,480).
- 20% rate: from $15,871 to $63,470 (€14,480 – €57,907).
- 40% rate: from $63,471 to $157,890 (€57,907 – €144,051).
- 45% rate: over $157,890 (€144,051).
- Example: if you earn $76,000 (€69,338) per year, you will pay 20% on the first $15,870 to $63,470, and 40% on the remaining amount, totaling $14,530 (€13,256) annually.
National Insurance Contributions
Employees who receive a salary must pay a series of annual taxes in England to contribute to national security. These contributions fund pensions, unemployment benefits, sick pay, and maternity leave. Here are the rates:
- 12% rate: for income between $15,871 to $63,470 (€14,480 – 57,907).
- 2% rate: on income over $63,470 (€57,907).
- Example: if you earn $50,000 (€45,617), you will need to contribute $4,120 (€3,758).
Value Added Tax (VAT)
Individuals who buy a product or acquire a service will pay an additional percentage on the price of that good, called VAT. In other countries, it’s also known as IVA, and it’s a source of state funding. Here are the rates applied in England:
- Standard 20% rate: for most products like clothing, technology, restaurants, or furniture.
- Reduced 5% rate: for some products like baby products or domestic supplies.
- 0% rate: no VAT for essential foods, books, or transportation.
- Example: buying a laptop priced at $1,000 (€912), the VAT will be $200 (€182), and you will pay a total of $1,200 (€1,095).
Council Tax
In addition to state taxes, there are local taxes in England managed by each local council. The Council Tax is applied for living in a residential property, and the revenue is used for community services such as fire services, garbage collection, and street maintenance.
The amount to pay will depend on the municipality and the property’s tax band, but it is approximately between $1,270 to $3,800 (€1,158 – €3,466) annually.
Stamp Duty Land Tax
If you buy a residential or commercial property in England, you will have to pay the Stamp Duty Land Tax, which is applied to the property’s price and works through the following brackets:
- 0% rate: up to $310,000 (€282,830).
- 5% rate: from $310,001 to $395,000 (€282,830 – 360,380).
- 10% rate: from $395,001 to $1,040,000 (€360,380 – 948,850).
- 12% rate: over $1,040,000 (€948,850).
- 3% extra rate: added in each bracket for purchasing a second home.
- Example: when buying a first property worth $500,000 (€456,177), you will pay 5% on the first $310,001 to $395,000 (€282,000 – 359,000) and 10% on the remaining $105,000 (€96,000), totaling $14,750 (€13,457).
Taxes for businesses in England
Are you thinking of setting up a business in this country? Then, pay attention to the next section where we detail the taxes in England that you will have to face.
We define a legal entity as any institution legally formed and established as a business, association, partnership, or cooperative that is responsible for the institution’s assets.
Corporation Tax
Companies registered in the UK, both local and foreign branches, must tax their net profits. This way, the state can finance infrastructure improvements and economic development. The current rates are as follows:
- 25% rate: for companies with profits over $317,000 (€289,216).
- 19% rate: for profits up to $63,470 (€58,960).
- Marginal rate: if you have profits between these two values, the percentage is adjusted gradually.
- Example: if your business generates $200,000 (€182,471) in revenue, a gradual rate of approximately 23.5% will be applied, to avoid a sudden jump in tax burden.
VAT for Businesses
Taxes in England related to the value added to consumption apply both to individuals, as we’ve seen earlier, and to businesses. These businesses are responsible for collecting this money on their invoices and submitting it to the government.
As an important note, only businesses generating annual income over $106,900 (€97,536) are required to register and collect VAT. The rates applied are 20% and 5%.
Employer Contributions
For every worker hired, companies contribute to the social security system. This way, the government ensures the social protection of employees, such as retirement pensions or sickness benefits.
- 13.8% rate: applied to salaries over $11,380 (€10,550).
- Example: for a worker with a monthly salary of $3,000 (€2,775), the company would be exempt from paying up to $1,125 (€1,026) and would need to pay 13.8% on the remaining $1,875 (€1,710), equating to $258 (€235) monthly.
Vehicle Excise Duty (VED) & Benefit in Kind (BiK)
Company vehicles used for commercial activities also have taxes in England. The rates depend on the type of vehicle and its CO₂ emissions level:
- Vehicle Excise Duty (VED): annual tax based on emissions. Ranges from $0 to $3,300 (€0 – €3,010).
- Benefit in Kind (BiK): added to the employee’s taxable salary based on the car type.
- Example: An electric car might be exempt, but an SUV with high emissions could generate an additional BiK charge of up to $9,000 (€8,211) in taxable income.
Business Rates
Finally, let’s talk about taxes on commercial properties in England. The Business Rates are applied to the rateable value of the premises or commercial property.
The rate varies depending on the region and type of property, but the standard rate is usually about 49.9%. For example, for a commercial property valued at $50,000 (€45,617), you would have to pay around $24,950 (€23,070) annually.
How to pay taxes online in England
Since the entire English tax system is digitalised, it’s very easy to handle your tax returns online. Here are the steps you need to follow:
- Register at HM Revenue & Customs (HMRC), the body responsible for tax collection in the UK.
- Select the tax you want to pay from all the ones mentioned in this article.
- Check your documents to ensure all details are correct.
- Choose your payment method through bank transfer, credit card, or direct debit.
- Keep the payment receipt in a secure place.
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Tax Benefits in England
The UK government has also implemented a range of tax benefits aimed at supporting small businesses, generating quality employment, stimulating the real economy, and attracting foreign companies with significant tax reductions. Here are some of the most important benefits:
| Tax benefit | Details |
|---|---|
| New Tech Startups | 30% deduction for research and development (R&D Tax Credits) |
| Investment in commercial properties | Deduction of a portion of costs in the income tax return, up to 100% for amounts less than $18,600 (€16,969). |
| Expats | Tax benefits related to tax residency |
| Companies relocating to the UK | Competitive tax system |
| Special Economic Zones (Midlands, Wales or Northern England) | Significant tax reductions for up to 5 years. |
Frequently Asked Questions about Taxes in England
This tax is applied to consumption and falls on the end consumer. The general rate is 20% and the reduced rate is 9%. Businesses are responsible for collecting it in their invoices.
It is only mandatory if your business has an annual turnover over $106,000 (€96,709).
Yes, you can get a 30% deduction for research and development and tax reductions for up to 5 years if you establish your business in one of the special zones.
HMRC will impose <!– Missing information: complete description of penalties –>
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