Income tax in United Kingdom

Taxation Researcher | January 02, 2020


Most UK residents are taxed on their worldwide income and on capital gains from disposal of their UK assets, and most likely on their overseas properties too (but see non-domiciliaries below). Couples, including registered same sex partners, are taxed separately.

The tax year in UK is from 05 April of one year to 06 April of another year. The tax year 20-2019-2020 is from 06 April 2019 to 05 April 2020. The tax year 2020-2021 is from 06 April 2020 to 05 April 2021.


The resident´s taxable income is his worldwide income, including income from residential property lettings, less allowable deductions. Taxable income is taxed at progressive rates.

INCOME TAX 2017-2018

Up to 33,500 (€44,667) 20%
33,500 - 150,000 (€200,000) 40%
Over 150,000 (€200,000) 45%
Source: Global Property Guide

INCOME TAX 2018-2019

Up to 34,500 (€46,000) 20%
34,500 - 150,000 (€200,000) 40%
Over 150,000 (€200,000) 45%
Source: Global Property Guide

Taxpayers may deduct personal allowances


Personal Allowance 10,600 (€14,333)
Married Couple Allowance 10,600 (€14,333)
Blind Person Allowance 2,320 (€3,093)


Personal Allowance 11,850 (€15,800)
Married Couple Allowance 8,695 (€11,593)
Blind Person Allowance 2,390 (€3,187)

The married couple´s allowance is allocated between the spouses. Usually, each spouse claims half of the married couple´s allowance but the couple may elect to have it wholly claimed by either of them, or to have the unused portion of the allowance transferred to either spouse.

The married couple´s allowance is allocated between the spouses. Usually, each spouse claims half of the married couple´s allowance but the couple may elect to have it wholly claimed by either of them, or to have the unused portion of the allowance transferred to either spouse.

A resident may deduct travel costs he incurred, if it were solely for rental business purposes, from his overseas property letting income. Overseas leasing assets are given allowances at special rates (6% and 10%). A resident who is blind may also claim blind persons allowance at £1,980 (€2,475) for tax year 2013-2014, and £2,100 (€2,625) for tax year 2014-2015.


A resident is taxable on the net capital gains he earns from selling his properties in the UK and elsewhere (subject to double taxation agreements).

Capital gains are taxed at progressive rates, from 18% to 28%. The capital gains tax rate of 18% applies to capital gains up to the basic rate threshold and 28% on the capital gains above the basic rate threshold.

The personal allowance for capital gains is £11,100 (€15,027) for the tax year 2015-2016. For couples living together, each spouse is entitled to a separate annual exemption.

A resident who incurs capital losses may set those off against any capital gains he makes for the same tax year. If there are still excess losses, he may carry those forward (without time limit) for set off against the gains of the succeeding years.

Primary Residence Relief

No CGT is payable on one´s primary residence. A resident who has resided on his property but later moved out while retaining ownership may claim this relief from the tax on his capital gains. In such a set-up, a resident is not liable to capital gains tax for the period he lived in the property and for the last three years (36-Month Rule) that he owned it. In the capital gains computation, the gains are allocated evenly across the period that he owned it even if those actually arose unevenly.

Letting Relief

A resident may avail of this relief if he has both lived in the property for a time, and let it for residential accommodation. The tax relief is whichever is lowest among: the Private Residence Relief; gain from the let period; and £40,000 (€54,152).


Till 5 April 2008 the UK was generally considered a tax-haven for ´non-domiciled´ foreign residents, i.e., those who came to the UK without intending to make it their permanent home. However, much has changed since 5 April 2008, when a comprehensive reform of the UK tax rules came into force.

Those who come to the UK temporarily or who are not domiciled in the UK, still benefit from special treatment. The treatment depends on whether they are ´resident´, ´ordinarily resident´, and/or ´domiciled´ in the UK.

What is ´resident´? Those who spend more than 183 days in any one year in the UK are considered ´resident´.

Those who come to the UK and who intend to visit the UK regularly (i.e., intend that over the next 4 years their visits will average more than 91 days in the year) are counted as ´resident´. Those who form no such intention, but in fact average more than 91 days during a tax year for 4+ years, are counted as ´resident´ from the 5th year.

The concept ´ordinarily resident´ is less important than ´resident´:

  1. If an individual arrives in the UK with the intention of staying for at least 3 years (students who stay less than 4 years excepted), he is treated as ´ordinarily resident´
  2. After 3 years of residence he is treated as ´ordinarily resident´.
  3. If from the date of the individual´s arrival, if he own accommodation in the UK, unless he sells if before he leaves the UK.

What is ´domicile´? Domicile status is a complex concept but essentially means, where an individual´s ´home country ´ is, where he is likely to return to live, where his parents live or were born, or where he has chosen as his permanent location. ´Domicile´ may be different from an individual´s present residence, or his nationality.

Capital Gains Tax payable by resident non-domiciliaries

Every resident must pay Capital Gains Tax on the sale of UK assets.

If an individual is a resident but not domiciled in the UK, and sell foreign assets, he will only be liable for Capital Gains Tax on the sale of foreign assets if the proceeds are remitted to the UK. But the remittance basis must be specifically claimed, as above, with the accompanying loss of UK allowances.


Council Tax

United Kingdom houses for sale

Council tax is a tax set by each locality on UK properties that may be used as dwelling, regardless of whether owned or rented. Fifty percent (50%) of the tax payable is based on the property band (A-H) to which the property belongs. The other 50% depends on the number of persons living in the property. If a person, of legal age, lives alone in the property, the taxpayer may avail of the Single Person Discount and the second 50% may be reduced to 25%.

Where there is an assured tenancy (the normal case) the tenant pays the tax. However if there are no tenants, property owners are usually liable for this tax.