UK Taxes 2026/27: Tax Rates, Reforms and What Entrepreneurs Need to Know
The UK tax system has changed more since 2024 than in the two decades before: higher employer contributions, rising taxes on dividends and capital gains, the end of non-dom status and frozen allowances until 2031. This overview of UK taxes sets out the rates for the 2026/27 tax year (6 April 2026 to 5 April 2027), corrects common misconceptions and explains for whom a UK structure still makes sense today.
- ✛Income tax: 0 / 20 / 40 / 45%. The allowance and bands remain frozen until April 2031.
- ✛Corporation tax: 19% up to £50,000 profit, 25% from £250,000, with marginal relief in between.
- ✛Dividends since 6 April 2026: 10.75% / 35.75% / 39.35%, with a £500 allowance.
- ✛Since April 2025, employers pay 15% National Insurance on salaries above £5,000 a year.
- ✛Non-dom has been abolished. New arrivals benefit from the FIG regime for at most four years, after which worldwide income is taxed.
Overview: the key UK taxes for 2026/27
Strictly speaking, there are no «English» taxes: taxes are levied across the whole United Kingdom by HMRC. Only income tax on earned and business income differs in Scotland, which has its own bands. All figures below apply to England, Wales and Northern Ireland.
| Tax | Rate 2026/27 | Applies to |
|---|---|---|
| Income tax | 0 / 20 / 40 / 45% | Individuals |
| Dividend tax | 10.75 / 35.75 / 39.35% | Distributions to individuals |
| National Insurance | 8% / 2% (employees), 15% (employers), 6% / 2% (self-employed) | Earned income |
| Corporation tax | 19–25% | Companies |
| Capital gains tax | 18% / 24% | Gains on disposals |
| VAT | 20% (reduced 5%, zero rate 0%) | Turnover from £90,000 |
| Inheritance tax | 40% above £325,000 | Estates and gifts |
Income tax in the UK
Income tax is progressive. For 2026/27, the following tax bands apply unchanged in England:
| Taxable income | Rate | Band |
|---|---|---|
| up to £12,570 | 0% | Personal allowance |
| £12,571 – £50,270 | 20% | Basic rate |
| £50,271 – £125,140 | 40% | Higher rate |
| over £125,140 | 45% | Additional rate |
Above £100,000 income, the allowance is reduced by £1 for every £2 of additional income and disappears entirely at £125,140. This creates an effective marginal rate of 60% between £100,000 and £125,140.
Frozen allowances: the November 2025 Budget keeps the allowance and bands unchanged until April 2031. As incomes rise, more taxpayers move into higher bands every year. For 2027/28, a further 2 percentage points on savings and property income have also been announced.
Corporation tax: company taxation in the UK
Since April 2023, corporation tax has been tiered by profit:
| Taxable profit | Rate | Name |
|---|---|---|
| up to £50,000 | 19% | Small profits rate |
| £50,001 – £250,000 | effectively 19–25% | Marginal relief |
| over £250,000 | 25% | Main rate |
The limits are divided by the number of associated companies. With two associated companies, the 19% threshold is therefore £25,000 per company. Within the marginal relief band, the marginal rate is 26.5%.
- ✛Loss carry-forward: unlimited in time, but above £5m a year only up to 50% of profits can be offset.
- ✛Patent box: 10% on profits from qualifying patents.
- ✛Research: since April 2024, a merged R&D scheme with a 20% credit applies. Loss-making, R&D-intensive SMEs receive an enhanced deduction of 186% in total via ERIS.
- ✛Investment: the Annual Investment Allowance allows immediate write-off of up to £1m a year.
- ✛No withholding tax on dividends: UK companies generally do not withhold tax on distributions.
Those looking to acquire companies or build strategic shareholdings can find suitable targets on platforms such as Aligned IQ. Their structure should be planned cleanly for tax from the outset.
Corporation tax follows residence: a UK company that is actually managed from Germany, Austria or Switzerland may be treated as resident there. More in our article on permanent representatives and CFC taxation.
Dividends and capital gains
For shareholders of a limited company, dividend tax is central. Higher rates have applied since 6 April 2026:
| Band | to 2025/26 | from 2026/27 |
|---|---|---|
| Basic rate | 8.75% | 10.75% |
| Higher rate | 33.75% | 35.75% |
| Additional rate | 39.35% | 39.35% |
The first £500 of dividends each year remain tax-free. Since 30 October 2024, capital gains tax has been a uniform 18% within the basic rate band and 24% above, including on residential property. The annual exempt amount is £3,000.
Former Entrepreneurs' Relief is now called Business Asset Disposal Relief (BADR). Its rate rose from 10% to 14% (April 2025) and has been 18% since 6 April 2026 on lifetime gains of up to £1m.
The end of non-dom status
For over 200 years, people resident in the UK but with a foreign «domicile» could pay tax on foreign income only when it was brought into the UK (remittance basis). On 6 April 2025, this regime was abolished and replaced by a purely residence-based system.
- ✛FIG regime: anyone not UK resident in the previous ten tax years can exempt foreign income and gains for their first four years – whether or not they are brought into the country.
- ✛Afterwards: full taxation of worldwide income.
- ✛Inheritance tax: this too now follows residence rather than domicile. Anyone UK resident in at least 10 of the last 20 years is subject to inheritance tax on their worldwide assets.
- ✛Temporary Repatriation Facility: former remittance basis users can pay tax on pre-April 2025 foreign income at 12% for 2025/26 and 2026/27 and at 15% for 2027/28.
Residence is determined by the Statutory Residence Test – not a simple 183-day rule. Depending on UK ties (family, accommodation, work), as few as 16 days a year can be enough. Anyone planning to relocate should therefore plan carefully. More under residency abroad.
VAT and other taxes
VAT registration is required from taxable turnover of £90,000 in twelve months. Companies not established in the UK have no threshold – they must register from their first taxable supply in the UK.
- ✛Standard rate 20%: most goods and services.
- ✛Reduced rate 5%: e.g. domestic energy and child car seats.
- ✛Zero rate 0%: most food, books, children's clothing, public transport and period products.
- ✛Exempt: financial services, insurance, education, health.
| Tax | Rate | Note |
|---|---|---|
| Stamp duty land tax | 0–12% | Plus 5% for additional homes and 2% for non-residents. Since April 2025, first-time buyers pay no SDLT only up to £300,000. |
| Inheritance tax | 40% | Allowance £325,000, plus £175,000 for the family home. From April 2027, unused pension funds are also included. |
| Insurance premium tax | 12% | On most insurance premiums |
| Digital services tax | 2% | Since 2020, only for large groups with over £500m global revenue |
Limited company or sole trader? An honest comparison
A common myth is that a limited company always saves tax. With higher employer contributions and dividend rates, this no longer holds in 2026/27. Our worked example for £80,000 profit with full extraction:
| Sole trader | Limited company | |
|---|---|---|
| Income tax / dividend tax | approx. £19,430 | approx. £9,280 |
| National Insurance | approx. £2,860 | approx. £1,140 (employer) |
| Corporation tax | – | approx. £13,820 |
| Total burden | approx. £22,290 (27.9%) | approx. £24,240 (30.3%) |
A limited company pays off mainly when profits are retained and reinvested, when liability needs to be limited or when investors are involved. Those who extract everything often do as well or better with a transparent structure.
Since April 2026, self-employed people and landlords with income above £50,000 must also use Making Tax Digital. They then report their income digitally to HMRC every quarter.
For international entrepreneurs without UK residence, the tax-transparent UK LLP is often of interest. It pays no corporation tax itself; partners are taxed in their country of residence. How to set it up correctly is shown in our guide UK LLP step by step. The most common misconceptions are covered in our article on UK LLP mistakes and myths.
Double tax treaties: Germany, Austria, Switzerland
The UK has one of the largest treaty networks in the world with more than 130 agreements, including with Germany (Order 2010), Austria and Switzerland. The treaties determine which state may tax which income and provide for credit or exemption.
- ✛Business profits: taxed in the company's state of residence – unless there is a permanent establishment in the other state.
- ✛Dividends: the UK levies no domestic withholding tax. Taxation takes place at the recipient's level in their country of residence.
- ✛Interest and royalties: in most cases, treaty withholding tax is reduced to 0%.
- ✛Place of management: if a UK company is actually managed from Germany, Germany may treat it as resident.
For entrepreneurs expanding into Asia alongside the UK, specialised advisers such as Kenneth & Co support the formation and compliance of subsidiaries in Singapore.
Since Brexit, the EU directives (parent-subsidiary, interest and royalties) no longer apply. There is no direct access to the EU single market any more, which means customs and import VAT for trade in goods.
The UK in international comparison
| Country | Corporate tax | Remark |
|---|---|---|
| United Kingdom | 19–25% | Strong legal system, no withholding tax on dividends |
| Switzerland | approx. 12–21% effective | Depending on canton, very stable |
| Ireland | 12.5% / 15% | 15% for large groups (Pillar Two) |
| Netherlands | 19% / 25.8% | 25.8% on profits above €200,000 |
| Singapore | 17% | Foreign income exempt under conditions |
The tax rate alone is rarely decisive. Substance, banking access, legal certainty and the tax consequences in your own country of residence matter at least as much. How UK structures compare with Hong Kong and EU companies is shown in our comparison of UK LLP, Hong Kong and EU. On the new minimum tax rules, see Hong Kong and Pillar Two.
Conclusion: the UK remains relevant, but differently than before
The United Kingdom is not a low-tax country and will not become one under the current government. It does offer a stable legal system, an internationally recognised company location, no withholding tax on dividends and, with the LLP, a flexible transparent legal form. Those living in or moving to the UK now pay considerably more than before 2024 – especially on investment income and after the end of non-dom status.
SWICOR forms and administers UK companies and LLPs remotely – with a personal Swiss contact, fixed flat fees and partners for UK accounting and tax returns.
Form a limited company or LLP in England – with clear tax planning.
Company formation England →Frequently asked questions
What is the UK income tax rate for 2026/27?
0% up to £12,570, 20% up to £50,270, 40% up to £125,140 and 45% above. The bands are frozen until April 2031. Scotland has different rates.
What is the UK corporation tax rate?
19% up to £50,000 profit, 25% from £250,000, with a gradual transition via marginal relief in between.
How are dividends taxed in the UK?
Since 6 April 2026 at 10.75% (basic rate), 35.75% (higher rate) and 39.35% (additional rate). The first £500 is tax-free.
Does non-dom status still exist?
No. Since 6 April 2025, a residence-based system applies. New arrivals who have not been UK resident for ten years can exempt foreign income for four years under the FIG regime.
When do I need to register for VAT?
From £90,000 taxable turnover in twelve months. Foreign companies not established in the UK have no threshold.
Does a limited company always save tax?
No. With full profit extraction, the burden in 2026/27 is often similar to or higher than for a sole trader. Advantages arise mainly with retained profits.
Is a UK LLP of interest for entrepreneurs without UK residence?
Often yes, because it is tax-transparent. Whether and where profits are taxable depends on the partners' country of residence and on where the business is actually managed.
A structure in the United Kingdom?
We assess whether a limited company, an LLP or another jurisdiction suits your profile and support formation and ongoing administration remotely.
This article is a general analysis and does not replace individual tax or legal advice. Regulations change; the information reflects the status at the date of publication.