Taxes in the UK vs. US: The Full Breakdown

If you’re getting ready to move to the United Kingdom, odds are that one of your chief concerns is what taxes are like in the UK vs. the US. Above all, will you need to pay more taxes in the UK than in the US? 

Although the UK does have a higher top income tax rate, that’s far from the only tax worth keeping in mind. You’ll also need to take capital gains, VAT, and social security taxes (among others) into account. While navigating all of this can feel pretty overwhelming, we’re here to walk you through it.

Below, you’ll find our guide to taxes in the UK vs. the US. Read on to learn what each country’s tax system involves, how they compare to one another, how to reduce your tax liability as an expat, and more.

Understanding the British tax system

The British tax system applies to all countries in the UK: England, Scotland, Wales, and Northern Ireland. While taxation across the three countries varies slightly, much of the tax code overlaps.

National taxes 

Before we get into tax rates, it’s worth mentioning the UK’s employee personal allowance. This is the amount of income that UK residents do not need to pay taxes on (similar to the US Standard Deduction).

For the 2024/2025 UK tax year (April 6th, 2024 to April 5th, 2025), the personal allowance is £12,570 (~$15,308) per year. The amount begins to decrease when you earn more than £100,000 (~$121,780) per year. If you earn over £125,140 (~$152,396), you can no longer claim a personal allowance at all.

There are also several other types of allowances:

• Married Couples Allowance: Up to £1,108 (~$1,349)
• Dividend Allowance: Up to £500 (~$609)
• Savings Allowance: Up to £5,000 (~$6,089)
• Self-Employment Allowance: £1,000 (~$1,218)
• Property Allowance: £1,000 (~$1,218)
• Blind Person’s Allowance: £3,070 (~$3,739)

UK PAYE Tax Rates and Thresholds, 2024/2025 tax year

For most workers, anything above the personal allowance is subject to the Pay As You Earn (PAYE) tax system. These tax rates fluctuate based on how much you make, as well as where you live.

England, Wales, & Northern Ireland

• Basic tax rate: 20% on annual earnings from £12,571 to £50,270 (~$15,309 to ~$61,219)
• Higher tax rate: 40% on annual earnings from £50,271 to £125,140 (~$61,220 to ~$152,396)
• Additional tax rate: 45% on annual earnings above £125,140 (~$152,396)

Scotland

• Starter tax rate: 19% on annual earnings from £12,571 to £14,876 (~$15,309 to ~$18,116)
• Basic tax rate: 20% on annual earnings from £14,877 to £25,561 (~$18,117 to ~$31,128)
• Intermediate tax rate: 21% on annual earnings from £25,562 to £43,662 (~$31,129 to ~$53,172)
• Higher tax rate: 42% on annual earnings from £43,663 to £75,000 (~$53,173 to ~$91,335)
• Advanced tax rate: 45% on annual earnings from £75,001 to £125,140 (~$91,336 to ~$152,396)
• Top tax rate: 48% on annual earnings above £125,140 (~$152,396)

Note that dividend income has separate tax rates, ranging from 0% to 39.35%, depending on how much you earn. 

Council taxes

Owners and occupants of rental buildings in the UK are typically subject to a local tax called the Council Tax. This tax is based on: 

• The valuation band for your home
• How much your local council charges for that band
• Whether you can get a discount or exemption from the total bill
  • Note: Local councils may offer discounts and exemptions for full-time students, those with disabilities, and those with vacation homes or empty properties.

On average, residents pay between £1,300 and £2,000 (~$1,583 and ~$2,435) per year.

UK vs. US: Side-by-side income tax rates comparison

You’ve seen what UK income taxes are like — now, let’s see how British and US tax rates compare. 

US income tax rates, 2024

Tax Rate	Single	Married filing jointly	Married filing separately	Head of household
10%	$0 – $11,600	$0 – $23,200	$0 – $11,600	$0 – $16,550
12%	$11,601 – $47,150	$23,201 – $94,300	$11,601 – $47,150	$16,551 – $63,100
22%	$47,151 – $100,525	$94,301 – $201,050	$47,151 – $100,525	$63,101 – $100,500
24%	$100,526 – $191,950	$201,051 – $383,900	$100,526 – $191,950	$100,501 – $191,950
32%	$191,951 – $243,725	$383,901 – $487,450	$191,951 – $243,725	$191,951 – $243,700
35%	$243,726 – $609,350	$487,451 – $731,200	$243,726 – $365,600	$243,701 – $609,350
37%	$609,351+	$731,201+	$365,601+	$609,351+

US income tax rates, 2025

Tax Rate	Single or Married filing separately	Married filing jointly	Married filing separately	Head of household
10%	$0 – $11,925	$0 – $23,850	$0 – $11,925	$0 – $17,000
12%	$11,926 – $48,475	$23,851 – $96,950	$11,926 – $48,475	$17,001 – $64,850
22%	$48,476 – $103,350	$96,951 – $206,700	$48,476 – $103,350	$64,851 – $103,350
24%	$103,351 – $197,300	$206,701 – $394,600	$103,351 – $197,300	$103,351 – $197,300
32%	$197,301 – $250,525	$394,601 – $501,050	$197,301 – $250,525	$197,301 – $250,500
35%	$250,526 – $626,350	$501,051 – $751,600	$250,526 – $375,800	$250,501 – $626,350
37%	$626,351+	$751,601+	$375,801+	$626,351+

Qualified dividend income is taxed at a rate of 0%, 15%, or 20%, depending on overall taxable income. Ordinary dividends, however, are taxed according to the ordinary income tax rates above — as is interest income.

State taxes

Most US expats don’t have to pay state taxes unless they retain significant ties to a state (i.e. a home, a business, a family). 

However, a handful of states make it extra challenging to renounce your state tax residency, including California, New Mexico, New York, Virginia, and South Carolina. In these states, you may need to change your state tax residency to free yourself from state tax obligations.

For those who do have to pay state income taxes, tax rates vary widely. Single filers may face income taxes as low as 0% in Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming. Conversely, they may be as high as 13.3% for the top income tax bracket in California (when factoring in the state’s wealth tax).

Case study

Carlos is a US expat living and working in London, England as a consultant. His taxable income includes £80,000 (~$97,424) of ordinary earned income and £20,000 (~$24,356) of dividend income.

After applying the personal allowance of £12,570 (~$15,308), his ordinary earned income comes out to £67,430 (~$82,116). According to the tax brackets in England, he would fall into the higher tax bracket which is subject to a top marginal tax rate of 40%.

In the US, however, we would subtract the standard deduction of $14,600 from his $97,424 salary instead of the UK’s personal allowance — resulting in taxable earnings of $82,824. According to the US tax brackets, he would be subject to a 22% top marginal tax rate. As a former resident of Florida, his income would not be subject to state taxes.

His taxable dividend income in the UK, meanwhile, would come out to £19,500 (~$23,740) after factoring in the £500 (~$609) dividend allowance. Based on his higher tax bracket in England, he would be subject to a 33.75% tax on his dividends.

Assuming his dividends are qualified US dividends, Carlos’ dividend income would be subject to a 15% tax rate in the US given his tax bracket.

US vs. UK tax calculator

UK vs. US capital gains taxes

Differences in capital gains taxes can play a huge role in how US expats approach moving to another country. While specific questions are best left to US and UK tax professionals, understanding the baseline rules is a helpful starting point.

UK capital gains taxes

The UK taxes capital gains at different rates by tax bracket: basic, higher, and additional. Confusingly, though, your capital gains tax bracket may be different than your PAYE tax bracket.

To calculate which capital gains tax bracket you fall into, you must:

• Calculate taxable income (total income minus personal allowance & any income tax relief you can claim)
• Calculate your total taxable gains
• Subtract your capital gains allowance from your total taxable gains
• Add this to your taxable income & see where that figure falls in the PAYE brackets

If the final figure falls within the basic tax band, you’ll pay taxes at the following rates, depending on when you sold the asset in question:

• Between April 6 & October 29th, 2024: 18% on residential property and carried interest gains; 10% on all others
• On or after October 30th, 2024: 18%

If the final figure falls within the higher or additional tax band, you’ll pay taxes at the following rates — again, depending on when you sold the asset in question:

• Between April 6 & October 29th, 2024
  • 24% on residential property gains
  • 28% on carried interest gains
  • 20% on all other gains
• On or after October 30th, 2024
  • 24% on residential property gains
  • 28% on carried interest gains
  • 24% on all other gains

Regardless of which bracket you fall into, you’ll have a capital gains allowance of £3,000 (~$3,654).

US capital gains taxes

Short-term capital gains (i.e. profits from the sale of assets held for a year or less) have the same tax rates as ordinary income: 10% to 37%.

Profits from the sale of assets held for more than a year, however, benefit from the more favorable long-term capital gains tax rate. Long-term capital gains tax rates are either 0%, 15%, or 20%, depending on your overall taxable income.

US capital gains tax rates, 2024

Tax Rate	Single or Married filing separately	Married filing jointly	Married filing separately	Head of household
0%	$0 – $47,025	$0 – $94,050	$0 – $47,025	$0 – $63,000
15%	$47,026 – $518,900	$94,051 – $583,750	$47,026 – $291,850	$63,001 – $551,350
20%	$518,901+	$583,751+	$291,851+	$551,351+

US capital gains tax rates, 2025

Tax Rate	Single or Married filing separately	Married filing jointly	Married filing separately	Head of household
0%	$0 – $48,350	$0 – $96,700	$0 – $48,350	$0 – $64,750
15%	$48,351 – $533,400	$96,701 – $600,050	$48,350 – $300,000	$64,751 – $566,700
20%	$533,401+	$600,051+	$300,001+	$566,701+

Case study

Sarah and Elliott are a US expat couple living in the UK. On June 3rd, 2024, they sold their Brighton vacation home for £500,000 (~$608,900) after purchasing it for £400,000 (~$487,120) in 2013. To calculate their capital gains taxes, they must:

1. Calculate their total taxable income, which comes out to £120,000 (~$146,136)
2. Calculate their total taxable gains by subtracting the adjusted cost base (£400,000, or about $487,120) from the sale price (£500,000, or about $608,900), which comes out to £100,000 (~$121,780)
3. Subtract the capital gains allowance (£3,000, or about $3,654) from their total taxable gains (£100,000, or about $121,780), which comes out to £97,000 (~$118,127)
4. Add that figure to their taxable income (£120,000, or about $146,136), which comes out to £217,000 (~$264,263)

Sarah and Elliott see that £217,000 (~$264,263) falls into the advanced tax bracket. Given the purchase date of June 3rd 2024 and the fact that their gains are residential property gains, they will pay a 24% tax rate on their £97,000 (~$118,127) in capital gains, or £23,280 (~$28,350).

To calculate their US capital gains taxes, they will first:

1. Calculate their overall taxable income, which comes out to $117,000 given the differences in US tax relief
2. See which bracket their overall taxable income falls into on the long-term capital gains tax table, which turns out to be 15%
3. Multiply their total taxable gains (£97,000, or ~$118,127) by 15%

Ultimately, their US capital gains tax liability is $17,719.

How UK & US corporate taxes compare

UK corporate taxes

UK corporate tax rates vary primarily based on profit. The main rate of 25% applies to businesses with profits over £250,000 (~$304,450), while a 19% small profits rate applies to businesses with profits of £50,000 (~$60,843) or less. Businesses with income between £50,000 (~$60,843) and £250,000 (~$304,450) are subject to taxes at a sliding scale between 19% and 25%.

The UK has separate taxation schemes for: 

• Oil and gas companies
• Life insurance companies
• Companies that operate ships
• Companies in the banking industry
• Real estate investment trusts
• Qualifying asset-holding companies
• Residential property developers

US corporate taxes

Ever since the Tax Cuts and Jobs Act of 2017, the US corporate tax rate has been a flat 21%. Note that this rate only applies to C corporations or Limited Liability Companies (LLCs) that have elected to be taxed as a C corp.

The other types of businesses — S corporations, partnerships, LLCs that haven’t elected C corp taxation, and sole proprietorships — are pass-through entities. Pass-through entities pass the profits onto the owners, who report the income on their individual tax returns.

How UK VAT rates compare to the US

UK VAT rate

The standard UK VAT rate is 20%, while the reduced rate is 5% and applies only to some goods and services, like home energy. There’s also a 0% rate for certain items like food, public transportation, and books, while insurance, education, and health-related costs are exempt from VAT.

Businesses with over £90,000 (~$109,517) in revenue must register for VAT, charge it, and remit the proceeds to the government.

US VAT rate

The US does not have a federal value-added tax (VAT). Instead, it’s charged at the state level (where it’s referred to as a sales tax), and sometimes at the local level. The highest state sales tax rate is California (7.25%). The lowest is a five-way tie between Alaska, Delaware, Montana, New Hampshire, and Oregon (all 0%).

Comparing property tax for the UK vs. US

Property taxes in the UK

While there is no traditional property tax besides the previously mentioned council taxes, there is a tax on property purchases:

• Stamp Duty Land Tax (SDLT): A tax on property purchases in England and Northern Ireland
  • Primary homes: 0% to 12% for UK nationals, 2% to 14% for foreign buyers
  • Additional properties: 3% to 15% for UK nationals, 5% to 17% for foreign buyers
• Land & Buildings Transaction Tax (LBTT): A tax on property purchases in Scotland
  • Primary homes: 0% to 12%
  • Additional properties: 8%
  • Non-residential properties: 0% to 5% 
• Land Transaction Tax (LTT): A tax on property purchases in Wales
  • Primary homes: 0% to 12%
  • Additional properties: 5% to 17%
  • Non-residential properties: 0% to 6%

Certain property purchases — like new commercial builds — may be subject to VAT at the standard 20% rate.

US property tax rate

In the US, property taxes are imposed at the local level; each state establishes its own guidelines for how the local government in your jurisdiction can tax its residents. The tax range is broad, from 0.27% (Hawaii) to 2.08% (New Jersey). Transfer taxes, on the other hand, range from 0% to 3%.

UK vs. US Social Security contributions & benefits

Social security taxes in the UK

The UK equivalent to social security taxes are National Insurance Contributions (NICs). Your NIC tax rate will vary depending on your circumstances.

• Class 1: Automatically withheld from employees’ paychecks
  • Earnings between £12,571 & £50,270 (~$15,297 & ~$61,171) per year: 8%
  • Earnings above £50,270 (~$61,171) per year: 2%
• Class 2: Voluntary contributions from self-employed individuals earning less than £6,725 (~$8,183) per year
  • Flat rate of £3.45 (~$4.20) per week
• Class 3: Voluntary contributions for those who want to catch up on previous years of missed payments
  • Flat rate of £17.45 (~$21.23) per week
• Class 4: Mandatory contributions from self-employed individuals earning at least £12,571 (~$15,297)
  • Earnings between £12,571 & £50,270 (~$15,297 & ~$61,171) per year: 6%
  • Earnings above £50,270 (~$61,171) per year: 2%

It’s worth noting that while taxes in the UK are generally higher than in the US, the UK tends to offer more robust public services to taxpayers, such as paid parental leave, monthly child benefits, housing benefits, highly subsidized university tuition, and universal healthcare.

UK healthcare

One of the programs funded by NICs is the National Health Service, or NHS, which provides free and low-cost care to all UK residents.

 Some services (e.g. primary care, hospital care, preventative services) are completely free of cost. Other services (e.g. prescriptions in England, dental care, eye care) are offered at a low cost.

While UK public healthcare tends to be high quality, crowded facilities and long waitlists aren’t uncommon. To access faster service and more modern facilities, some opt for private insurance, which costs an average of:

• £79.62 (~$96.89) per month for individuals
• £146.86 (~$178.71) per month for couples
• £165.67 (~$201.60) per month for a family of four

Social Security taxes in the US

Social Security taxes in the US are comparatively much more straightforward. 

Employers withhold and match 6.2% of employees’ paychecks (up to $176,100) for the Old Age, Survivors, and Disability Insurance, or OASDI program. They also withhold and match an additional 1.45% for Medicare costs. In total, this equals 15.3%.

Since self-employed individuals have no employers to withhold taxes from their paychecks, they must pay the full 15.3% themselves.

US healthcare

US healthcare tends to be significantly more expensive than in other major developed countries. Public healthcare is only available to the elderly (Medicare) and certain low-income individuals (Medicaid). As of 2024, the average annual premium for private insurance in the US is $8,951 for individuals and $25,572 for families.

That said, private health insurance policyholders in the US often encounter shorter wait times, a larger choice of providers, and greater access to specialists and cutting-edge treatments.

UK-US totalization agreement

Since 1985, the US and the UK have had a totalization agreement that prevents US nationals living in the UK (and vice versa) from having to pay social security taxes to both countries. Which country you pay social security taxes to depends on how long you plan to stay there:

• Up to 5 years: Pay US Social Security taxes
• 5 years+: Pay UK NICs

That said, some choose to pay UK NIC even if they won’t be there for the full five years to access the benefits that NICs fund.

Additional tax considerations for American expats living in the UK

UK vs. US filing process comparison

The filing process differs significantly in the UK and the US, so it’s worth keeping track of the requirements for both.

UK filing requirements

In the UK, you must file a 2024/2025 tax return if you:

• Had a total taxable income exceeding £150,000 (~$182,528)
• Made more than £1,000 (~$1,217) in gross self-employment income
• Were a partner in a business partnership 
• Were subject to the capital gains tax
• Had to pay the High Income Child Benefit Charge

Additionally, you may need to file if you have untaxed income like:

• Rental income
• Tips/commissions
• Savings, investment, or dividend income
• Foreign income

The primary tax form in the UK is SA100, but you may need to file additional forms — making it a good idea to consult a UK tax professional. Most UK filers can e-file through the HRMC website, although they can also print and mail in forms or hire a tax professional to file on their behalf.

The deadline for UK filers is midnight on January 31st, 2025

US filing requirements

All US citizens and permanent residents must file a federal tax return as long as they meet the minimum filing threshold — even if they live abroad. For the 2024 tax year (the taxes you file in 2025), you must file a tax return if your income meets the following thresholds:

Filing Status	Filing Threshold (Under 65)	Filing Threshold (Age 65+)
Single	$13,850	$15,700
Head of Household	$20,800	$22,550
Married, filing jointly	$27,700	$29,450
Married, filing separately	$5	$5
Qualifying widow/widower	$29,200	$30,700
Self-employed individuals	$400	$400

The primary tax form for most US expats is Form 1040. Depending on your circumstances, however, you may also need to file additional forms, schedules, and reports. The best way to stay on top of all of your filing requirements is to consult a US expat tax professional like the ones at Bright!Tax.

Besides having a tax professional file on your behalf, you can also print and mail forms or use tax software. Keep in mind, however, that not all tax software allows US expats to file from abroad. Low-income individuals and families may also be able to access the online Free File program.

While most Americans file taxes on April 15th, US expats have until June 15th to file their tax returns. They can receive an additional extension to October 15th by filing Form 4868. However, they must still make an estimated tax payment by April 15th, regardless of when they file.

The potential for double taxation

If you meet both the US and UK filing requirements, you unfortunately must file returns in both countries. This means that you are also subject to taxation in both countries. As a result, American expats living in the UK risk facing taxes on the same income from two different countries, i.e. double taxation.

While the US/UK income tax treaty contains provisions that prevent double taxation in theory, it also contains a savings clause that allows the US to tax Americans as if the treaty didn’t exist. The good news? There are several exceptions to the savings clause, including one that allows Americans to make a one-time, tax-free withdrawal of up to 25% from their UK pension.

There are a couple of major tax breaks available to American expats living abroad, which can reduce — or even eliminate — your US tax burden.

Key tax breaks & reporting requirements for American expats living in the UK

The two most important tax breaks for US expats are the:

• Foreign Earned Income Exclusion (FEIE): Allows those who meet either the Physical Presence Test or Bona Fide Residence Test to exclude a portion of their foreign-earned income from taxation. For tax year 2024, expats can exclude up to $126,500 from income taxes. In 2025, that figure will increase to $130,000 to account for inflation
  • Note: The FEIE does not prevent self-employed expats from having to pay US Social Security taxes. 
• Foreign Tax Credit (FTC): Gives those who have paid foreign income taxes dollar-for-dollar US tax credits, provided the taxes were paid and charged in their name. In high-tax countries like the UK, this often not only eliminates your US tax liability, but also gives you carryforward credits to use on future tax bills
  • Note: Unfortunately, you cannot use the FTC to offset the US Net Investment Income Tax.

However, a move abroad may also result in having to file additional reports, such as the:

• Foreign Bank Account Report (FBAR): Requires those with holdings totaling over $10,000 in foreign accounts at any point in the tax year to file FinCEN Report 114
• Statement of Specified Assets: Requires those with over $200,000 in certain foreign assets on the last day of — or over $300,000 at any point during — the tax year to file Form 8938.
  • Note: Thresholds for filing Form 8938 vary for married couples and those who reside in the US.

References

1. Money and Tax – GOV.UK
2. United Kingdom – Overview
3. United States – Overview
4. State Individual Income Tax Rates and Brackets, 2024
5. What taxes are paid by property owners in the UK?
6. Land and Buildings Transaction Tax
7. Land Transaction Tax rates and bands
8. All You Need to Know About Real Estate Transfer Taxes by State in 2024
9. How much does private health insurance cost in the UK?
10. 2024 Employer Health Benefits Survey