UK Income Tax Rates for 2025
Updated on October 13, 2025
by Jeff Patterson
Jeff Patterson is an American living in Scotland and joined the team at Expat Tax Online after experiencing the complexities of living abroad with a family.
Table of Contents
If you’re a US citizen living in the UK, you’ll usually pay UK income tax as a resident. So, it’s important to understand how the UK tax system interacts with the US system. This knowledge might even save you a lot of money, since you could be at risk of double taxation.
For 2024-2025, most people in England, Wales, and Northern Ireland get a tax-free Personal Allowance of £12,570. Anything above that is taxed at progressively higher rates, depending on your income.
What is the UK Personal Allowance?
The Personal Allowance is the amount of income you can earn in the UK before paying income tax. For the 2024-2025 tax year, it’s £12,570 if your income is under £100,000.
If your income is
- Above £100,000: the allowance shrinks by £1 for every £2 earned.
- At £125,140 and above: your allowance is reduced to £0.
This is important for US expats because most of the time, the UK has higher tax rates than the US. The Personal Allowance reduces the portion of your income that is taxed in the UK, lowering your total tax burden.
If you’re married: If your spouse earns less than the allowance, you may qualify for the Marriage Allowance, which lets you transfer £1,260 of unused allowance to them, saving up to £252 in tax
What are the UK income tax bands for 2024-2025?
Here are the income tax bands in England, Wales, and Northern Ireland this year:
|
Band |
Taxable income |
Rate |
|
Personal Allowance |
Up to £12,570 |
0% |
|
Basic Rate |
£12,571 – £50,270 |
20% |
|
Higher Rate |
£50,271 – £125,140 |
40% |
|
Additional Rate |
£125,141+ |
45% |
Note: The UK uses a marginal tax system, which means only the part of your income that falls into a band is taxed at that rate.
How do marginal tax rates work for US expats in the UK?
Marginal tax rates mean you don’t pay the same rate on all of your income but only the portion that falls into each band.
Example:
Let’s say you’re a US expat working in London with a salary of £60,000 from 2024 to 2025.
Here’s how the UK income tax is applied to your salary:
- £0 to £12,570 → Personal Allowance (0% tax)
- £12,571 to £50,270 → £37,700 taxed at 20% = £7,540
- £50,271 to £60,000 → £9,730 taxed at 40% = £3,892
Total UK tax = £11,432
Only the portion above £50,270 is taxed at 40%, not your entire £60,000. If you were earning the same amount in Scotland, the calculation would look different because Scotland uses six separate income tax bands instead of three.
Get US tax help in the UK. Contact us today.
Scotland Income Tax Bands (2024-2025)
Scotland sets its own rates, and they’re steeper in higher brackets:
|
Band |
Taxable income |
Rate |
|
Starter |
£12,571 – £14,876 |
19% |
|
Basic |
£14,877 – £26,561 |
20% |
|
Intermediate |
£26,562 – £43,662 |
21% |
|
Higher |
£43,663 – £75,000 |
42% |
|
Advanced |
£75,001 – £125,140 |
45% |
|
Top |
£125,141+ |
48% |
Is National Insurance separate from income tax?
Yes, National Insurance (NI) is separate from income tax and is taken directly from most employees’ pay. It funds benefits like the State Pension, unemployment support, and maternity allowance. NI is similar to Social Security in the US.
Thanks to the US-UK totalization agreement, you usually won’t have to pay into both systems simultaneously. The treaty determines which country you pay into to prevent double contributions toward pensions.
How does Capital Gains Tax (CGT) work in the UK?
If you sell or give away an asset and make a profit, the UK may tax that profit as a capital gain. The rate you pay depends on both:
- Your income level (basic or higher/additional rate taxpayer)
- The type of asset: residential property, is taxed at higher rates than other assets (like shares).
Here are the UK Capital Gains Tax rates for 2024-2025
|
Income level |
Standard assets |
Residential property |
|
£50,270 and below |
10% |
18% |
|
Above £50,270 |
20% |
24% |
Capital gains allowance
Each tax year, you get a small tax-free capital gains allowance called the annual exempt amount. For 2024 to 2025, this amount is £3,000.
- If your total gains for the year are below £3,000, you don’t owe any CGT.
- If your gains are above £3,000, only the portion above the allowance is taxed.
However, the IRS doesn’t recognize the UK’s CGT allowance, so US taxpayers must still report all gains.
Dividend Tax in the UK (2024-2025)
If you earn dividends from shares, funds, or investments, they’re taxed separately from your salary. The rate depends on which income tax band you fall into:
|
Band |
UK Dividend Tax Rate |
|
Basic rate |
8.75% |
|
Higher rate |
33.75% |
|
Additional rate |
39.35% |
Dividend allowance
For the 2024-2025 tax year, you get a small dividend allowance of £500.
- This means the first £500 of dividends is tax-free.
- Anything above that is taxed at the rates above, depending on your total income.
This allowance used to be much higher (£5,000 back in 2016), but it has been cut down significantly, making dividends more costly for many investors.
How are self-employed individuals taxed in the UK?
Being self-employed in the UK means you’re responsible for handling your own taxes; no employer is taking care of it for you. So, the HMRC expects you to:
- register as self-employed,
- file a Self Assessment each year, and
- pay UK Income Tax and National Insurance on your profits.
As a US expat, your self-employment income is also subject to US self-employment tax (Social Security and Medicare), unless you’re already paying into UK National Insurance and qualify for relief under the US-UK totalization treaty.
US expats must always think about both systems. That’s why many expats find self-employment trickier than regular employment.
FAQs
-
Do expats pay UK income tax?
Yes, if you’re considered a UK tax resident. US expats must also file with the IRS. Double taxation is usually avoided through tax treaties, the Foreign Earned Income Exclusion (FEIE), or Foreign Tax Credits (FTC).
-
Can US expats use the Foreign Earned Income Exclusion (FEIE) instead of tax credits for UK income tax?
-
Do US expats in the UK pay National Insurance as well as income tax?
-
What is my personal tax allowance if I’m married?
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