UK Tax System Update 2025-26: What Expats & Working Holidaymakers Need to Know NOW
London, UK – September 12, 2025 – If you’re planning a move to the UK, are currently on a working holiday visa, or are an expat navigating the British tax system, pay close attention! Significant updates to income tax regulations for the 2025-26 tax year are now in effect, and understanding these changes is crucial to avoid penalties and maximize your financial wellbeing. This is a breaking news update with vital information for anyone earning income in the UK.
Understanding the UK Income Tax Landscape
The UK’s income tax system, managed by HM Revenue & Customs (HMRC), can seem complex, especially for newcomers. Generally, income from employment (salary and pensions) is automatically taxed through the Pay As You Earn (PAYE) system. However, self-employed individuals, landlords, and those with income from investments are responsible for filing their own tax returns via Self Assessment. The UK tax year runs from April 6th to April 5th of the following year.
Key Tax Rates for 2025-2026: England, Wales & Northern Ireland
The UK operates a progressive tax system, meaning the tax rate increases as your income rises. Here’s a breakdown of the rates for residents of England, Wales, and Northern Ireland:
- Personal Allowance: £12,570 (tax-free)
- Basic Rate: 20% (up to £37,700)
- High Rate: 40% (£37,701 – £125,140)
- Additional Rate: 45% (over £125,141)
Remember, the Personal Allowance begins to reduce if your income exceeds £100,000, disappearing entirely at £125,140.
Scotland: A Different Tax System
Tax rates in Scotland differ significantly. Here’s the breakdown for Scottish residents:
- Starter Rate: 19% (up to £2,827)
- Basic Rate: 20% (£2,828 – £14,921)
- Intermediate Rate: 21% (£14,922 – £31,092)
- High Rate: 42% (£31,093 – £62,430)
- Advanced Rate: 45% (£62,431 – £125,140)
- Maximum Rate: 48% (over £125,141)
Tax on Dividends and Savings
Income from dividends and savings is also taxable, but with preferential rates. The first £500 of dividend income is tax-free. Beyond that:
- Basic Rate Taxpayers: 8.75%
- High Rate Taxpayers: 33.75%
- Additional Rate Taxpayers: 39.35%
Savings interest also benefits from a Personal Savings Allowance: £1,000 for basic rate taxpayers, £500 for higher rate taxpayers, and no allowance for additional rate taxpayers.
Major Changes for Non-Domiciled Residents
Significant changes have been made to the tax system for non-domiciled residents, abolishing the previous “remittance basis” and introducing a new system based on residency duration. The new “Foreign Income and Gains Regime” (FIG Regime) offers tax benefits for the first four years of UK residency, but after that, worldwide income will be subject to UK tax.
Don’t Forget Tax Reliefs!
The UK offers various tax reliefs that can legally reduce your tax bill. These include:
- Pension Tax Relief: Based on pension contributions.
- Gift Aid: For charitable donations.
- Job Expenses: Uniforms, home office costs, etc.
- Self-Employment Expenses: Office costs, travel, etc.
- Marriage Allowance: Transferring a portion of the personal allowance between spouses.
Self Assessment: Your Tax Return Responsibilities
If you fall into certain categories – self-employment income over £1,000, rental income, being a company director, or having overseas income – you’ll need to file a Self Assessment tax return. Key deadlines to remember:
- New HMRC Registration: October 5, 2025
- Paper Tax Return: October 31, 2025
- Online Tax Return: January 31, 2026
- Tax Payment: January 31, 2026
Save Money on International Transfers with Wise
Moving money between the UK and your home country can be expensive. Wise offers a smarter, more affordable solution. With transparent fees, real-time exchange rates, and multi-currency accounts, Wise can save you significant money on international transfers. You can even get UK account details to receive payments locally, avoiding hefty bank fees. Learn more about Wise here.
Navigating the UK tax system doesn’t have to be daunting. Staying informed and utilizing available resources, like Wise for efficient money transfers, will ensure a smoother financial experience. This breaking news update is designed to empower you with the knowledge you need to thrive in the UK.
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Sources: HM Revenue & Customs, Wise
