The tax system in England differs from the one in Poland and is based mainly on Income Tax and Corporation Tax. See what they are and what taxation in the UK is like, especially if you plan to work or do business there. Below we discuss the types of taxes in the UK and their rates. We invite you to read.
Table of Contents
Types of Taxes in the United Kingdom
Taxes in England are divided into two categories: direct and indirect.
| Direct Taxes | Income Tax – personal income tax (equivalent to Polish PIT) Corporation Tax – corporate income tax (equivalent to Polish CIT) Capital Gain Tax – a tax on capital gains Inheritance Tax – a tax on inherited goods Stamp duty – fees on the purchase of real estate and stock exchange National Insurance contributions – social security contributions |
| Indirect Taxes | VAT excise – tax on specific goods (e.g. alcohol, tobacco, fuel) Customs duty – import/export duties |
Taxation in the UK – Personal Income Tax
Income tax in England applies to individuals who earn income above a certain threshold. This tax is settled progressively. Its amount depends on the level of income.
| Income Threshold | Tax rate |
| Up to 12570 £ | 0% (Personal Allowance) |
| 12571 £ – 50270 £ | 20% (Basic Rate) |
| 50271 £ – 125140 £ | 40% (Higher Rate) |
| Above 125140 £ | 45% (Additional Rate) |
Taxation in the UK – Tax Allowance
The most important advantage of the British tax system is the very high tax-free amount. It equals the sum of annual remuneration. Exceeding this threshold means that there is an obligation to pay income tax. Currently, the tax-free amount in the UK is 12500 GBP.
Taxation in the UK – Corporate Income Tax
Individuals who run a business in the form of a Limited Company must pay Corporation Tax. Since 2023, the standard corporate income tax rate in the UK is 25%. However, companies with profits that do not exceed 50000 £ may pay tax at a lower rate of 19%.
| Company’s Annual Income | Up to 50000 £ | 50001 £ – 250000 £ | Over 250000 £ |
| Tax rate | 19% | Effective rate 19 – 25% | 25% |
Self-employed people settle their taxes under the Self-Assessment Tax Return. It must be submitted by 31 January each year.
Taxation in the UK – Tax Exemption for Dividends
Dividends from most ordinary shares received by a UK company are exempt from UK Corporation Tax. There is no minimum holding period or any ownership requirements.
In the UK, most dividends and distributions qualify for a tax exemption. Still, there are some exceptions. They include dividends and distributions received by banks, insurance companies, or other financial institutions.
It is important to note that dividends cannot be part of a tax avoidance scheme. For smaller companies, dividends must be paid from a country that has a tax treaty with the UK, which includes a non-discrimination clause.
Taxation in the UK – VAT
Value Added Tax (VAT) is charged on most goods and services sold in the UK.
The current VAT rates are:
- standard rate – 20%,
- reduced rate (e.g. for energy, children’s car seats) – 5%,
- zero rate (e.g. food, books, children’s clothes) – 0%.
Companies with a turnover higher than 85 000 £ per year must register for VAT.
Taxation in the UK – Summary
Taxes in the UK are different from those in Poland. The tax system is mainly based on Income Tax and Corporation Tax. It is important to check your current tax rates and tax thresholds regularly, as these may change.
Are you planning to work or set up a business in the UK? Check how to optimize your taxes! Contact our experts and take care of your finances today!
FAQ – Taxation in the UK
What are the tax thresholds in the UK?
In 2024, the tax-free allowance is 12 570 £, with tax rates of 20%, 40%, and 45% for higher earnings.
Do I have to pay tax if I earn less than 12 570 £ per year?
No, income up to 12 570 £ is tax-free.
What National Insurance contributions do I have to pay?
It depends on your income and employment type. The standard rate is10% for employees and9% for self-employed persons.
Do self-employed individuals have to pay VAT?
Only if their annual turnover exceeds 85 000 £.
What are the VAT rates in the UK?
Standard rate – 20%
Reduced rate – 5% (e.g. energy, children’s car seats)
Zero rate – 0% (e.g., food, books, children’s clothing)
When is the deadline to file income tax in the UK?
For Self-Assessment Tax Returns, the deadline is 31st January of the following year.
Is there a local tax in the UK?
Yes, Council Tax applies to property owners and tenants.
How do I register a business in the UK?
You need to register your business with HMRC (His Majesty’s Revenue and Customs).
Do pensioners in the UK pay income tax?
Yes, if their income exceeds 12 570 £.
How can I verify what tax I have to pay in the UK?
You can check this via the HMRC system or PAYE online.