UK Tax System for Expats: UK Bloom

Understanding the UK Tax System for Expats living or working in the United Kingdom. Whether you’re employed, self-employed, or retired, this guide explains everything from residency rules and income tax bands to national insurance, double taxation treaties, and filing requirements.

Note: This article is for informational purposes only. Always consult the UK Home Office or a qualified tax adviser for personalized guidance.

UK Tax System for Expats

Residency and Tax Liability

Your UK tax liability depends primarily on your tax residency status, determined under the Statutory Residence Test (SRT). You are considered a UK resident for tax purposes if:

You spend 183 days or more in the UK in a tax year, or
Your only home is in the UK for at least 91 consecutive days, and you spend at least 30 days there,
You work full-time in the UK for 365 days.

If you do not meet these conditions, you are classed as a non-resident and are only taxed on UK-sourced income.

Income Tax Rates for Expats (2025)

If you’re classed as a UK tax resident, you’re subject to income tax on your worldwide income. For the 2025/26 tax year, the tax bands are:

Band	Taxable Income	Rate
Personal Allowance	Up to £12,570	0%
Basic Rate	£12,571 to £50,270	20%
Higher Rate	£50,271 to £125,140	40%
Additional Rate	Over £125,140	45%

Note: Personal Allowance tapers off for income over £100,000.

Check updated rates on HMRC’s official website.

National Insurance Contributions

National Insurance (NI) funds public benefits like the NHS and state pension. Expats working in the UK may have to pay:

Class	Applicable To	Rate
Class 1	Employees	8%–12% (varies)
Class 2	Self-employed	Flat £3.45/week
Class 4	Self-employed profits over £12,570	9%–2%

You may be exempt if your home country has a Social Security Agreement with the UK.

More info: National Insurance if you work abroad

Double Taxation Agreements (DTAs)

The UK has Double Taxation Agreements with over 130 countries, allowing expats to avoid being taxed twice on the same income.

Check your country’s treaty with the UK at the UK government’s DTA list.

You may be able to claim tax relief through:

Foreign Tax Credit Relief
Tax Treaty Exemptions
Split Year Treatment

Taxable and Non-Taxable Income

As a UK tax resident, these income types are taxable:

Employment income (UK and abroad)
Self-employment profits
Rental income from UK or foreign property
Interest and dividends
Pensions (UK and overseas)
Capital gains on worldwide assets

Non-taxable income may include:

Premium Bond winnings
Lottery winnings
Certain state benefits (e.g. Housing Benefit)
Gifts and inheritance (up to thresholds)

Tax Obligations for Different Income Types

Employment Income

If you’re employed in the UK, tax is typically deducted automatically through PAYE (Pay As You Earn). You must check your tax code to avoid overpayment.

Self-Employment

Self-employed expats must register with HMRC and file a Self Assessment tax return annually. National Insurance also applies (Class 2 and 4).

Foreign Income

You must declare foreign income, such as:

Overseas salary
Foreign investments
Property rental income
Dividends

Use the Foreign Income pages in your Self Assessment return.

Filing a Self-Assessment Tax Return

You must file a tax return if:

You’re self-employed
You have foreign income
You have over £1,000 in untaxed income
You receive rental income

Deadlines:

Register: 5 October following the tax year
Online filing: 31 January
Payment: 31 January and 31 July (if payments on account apply)

Capital Gains Tax for Expats

You may owe Capital Gains Tax (CGT) on:

Property sales (UK or global)
Business asset sales
Shares or crypto disposals

2025 Rates:

Asset Type	Basic Rate	Higher Rate
Property	18%	28%
Shares/Assets	10%	20%

Expats may be eligible for Private Residence Relief, Annual Exempt Amount, or Rollover Relief.

Inheritance Tax Implications

If you are domiciled in the UK, your worldwide estate may be subject to Inheritance Tax (IHT) at 40% on amounts over £325,000.

Even non-domiciled individuals may be taxed on UK-based assets.

Learn more: UK Inheritance Tax rules

Pension Taxation for Expats

UK Pensions

Income from a UK pension is subject to UK income tax, unless a DTA assigns it to your home country.

Foreign Pensions

Foreign pensions may be taxed in the UK if you’re a UK resident, although relief is sometimes available.

QROPS (Qualifying Recognised Overseas Pension Schemes) allow expats to move their pension abroad — but recent UK rule changes have added tax implications.

Avoiding Common Tax Mistakes

Ignoring residency rules and becoming liable for full UK tax
Not declaring foreign income and risking HMRC penalties
Missing filing deadlines
Incorrect tax codes
Relying solely on employer for tax matters

Use a tax adviser with international experience to stay compliant.

Useful Tools and Resources

Internal Resources on UKBloom

Final Thoughts

Managing your taxes as an expat in the UK requires a clear understanding of residency rules, income classifications, and international agreements. Use available tools, keep detailed records, and when in doubt, consult an expert.

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