The UK tax system can seem complex for migrants, especially those who have recently relocated or are planning to move. In this guide, you'll learn about the types of taxes for migrants in the UK in 2025, how to determine your tax residency status, and which rates apply.

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Overview of the UK Tax System

In the fiscal year 2023–24, the UK collected approximately £1.1 trillion in tax revenue, mainly from income tax, VAT, and National Insurance contributions.

The fiscal year for the government runs from April 1 to March 31. For individuals, the tax year is from April 6 to April 5.

Key tax authorities: HMRC (His Majesty’s Revenue and Customs), Scottish, Welsh, and Northern Irish tax bodies, and local councils.

Key Tax Changes in the UK in 2025

In October 2024, the UK government announced several reforms that came into effect in 2025:

- National Insurance contributions increased to 15% from April 2025.

- Capital gains tax (CGT) rates were raised: the lower rate from 10% to 18%, and the higher rate from 20% to 24%.

- VAT on private schools introduced from January 2025.

- Stamp duty on second-hand properties increased from 3% to 5%.

Are Expats Required to Pay Taxes in the UK?

Yes. Migrants who live and work in the UK are generally taxed the same way as British citizens. The UK tax system is based primarily on residency status:

- If you're a UK tax resident, you must pay taxes on your worldwide income.

- If you're not a resident, you may still be taxed on UK-sourced income.

 If you live in two countries, double taxation treaties may apply.

Double Taxation Agreements

The UK has over 130 double taxation treaties that help expats avoid being taxed twice on the same income.

 Check if your country of origin has a treaty with the UK and apply for relief using HMRC form DT.

How Do I Know If I’m a UK Tax Resident?

Tax residency is determined using the Statutory Residence Test (SRT), which considers the number of days spent in the UK, employment, housing, and personal ties.

You are considered a tax resident if you:

Spend 183 days or more in the UK in a tax year.

Have a permanent home or regular employment in the UK.

You may be considered non-resident if you stay fewer than 16 or 46 days (depending on your previous status).

Tax Identification Numbers in the UK: NINO & UTR

To engage with the UK tax system, you’ll need a tax identification number:

Most individuals use their National Insurance Number (NINO) for work, benefits, and tax.

If you file a self-assessment, you’ll be assigned a Unique Taxpayer Reference (UTR).

Businesses get a registration number upon incorporation.

VAT-registered entities are assigned a VAT number.

Types of Taxes for Migrants in the UK and Their Rates

Income Tax for Expats UK

Taxable income includes salary, business profits, pensions, rental income, dividends, interest, and even crypto assets.

Rates for 2025:

- Personal allowance: £12,570 (tax-free).

- Basic rate (20%): £12,571 – £50,270.

- Higher rate (40%): £50,271 – £125,140.

- Additional rate (45%): Above £125,140.

In Scotland, income tax bands may be slightly higher – up to 48%.

National Insurance Contributions for Foreigners

Employees contribute to National Insurance to fund pensions and social benefits.

Rates vary by class and employment status. 

2025 Rates:

- Employees (Class 1): 12% on weekly earnings between £242–£967, and 2% above that.

- Self-employed (Class 2): £3.45/week if earnings exceed £6,725/year.

- Self-employed (Class 4): 9% on profits from £12,570 to £50,270, and 2% above that.

- Employers: Up to 15%.

Value Added Tax (VAT)

VAT is a consumption tax on goods and services.

Standard rate: 20%.

Reduced rate: 5% (e.g., energy bills, child car seats).

Zero rate: Food, children’s clothing, books.

You don’t pay VAT directly, but it’s included in most purchases.

Council Tax

A local tax paid to local authorities to support services like waste collection and road maintenance. Based on property value and location. Typically ranges from £1,000 to £4,000 per year. Single occupants get a 25% discount.

Some migrants, such as full-time students, may be exempt or eligible for reductions.

Capital Gains Tax UK 2025

CGT applies when selling or gifting assets that have increased in value:

- Personal possessions worth over £6,000.

- Property (not your main home).

- Investments, shares, and business assets. 

2025 Rates:

- 18% for basic-rate taxpayers. 

- 24% for higher-rate taxpayers (property and other assets).

- 28% for investment funds.

Deadline: Pay within 60 days of the sale.

Non-residents selling UK property may also be subject to CGT.

Inheritance Tax (IHT)

IHT applies if the estate’s value exceeds £325,000. The threshold increases to £500,000 if passing on the main home to children. Spouses, civil partners, and charities are generally exempt.

Rate: 40%, payable within 6 months of death.

Filing a Tax Return as a Migrant in the UK

Most employees don’t need to file a return – tax is deducted via PAYE (Pay As You Earn). However, you must file a tax return if you:

- Are self-employed or freelancing.

- Earn rental income or have capital gains.

- Make over £100,000 annually.

- Receive foreign income.

Deadline for online filing: 31 January 2026 (for the 2024/25 tax year).

Note: Filing obligations may vary depending on your visa type and residency status.

Tax Planning Tips for Expats in the UK

- Reassess your residency status annually – it can change mid-year.

- Use personal and non-taxable allowances strategically.

- Consider keeping foreign income abroad if using the remittance basis.

- Track your days in the UK with apps or spreadsheets.

- Seek professional tax advice if your situation is complex.

Understanding the UK tax system for expats is essential for staying compliant and avoiding penalties. Whether you're working, studying, or running a business, knowing your obligations – and potential exemptions – will help you manage your finances effectively. If unsure, consult a tax adviser who specializes in migrant taxation.

Get advice from an immigration lawyer to understand your tax obligations in the UK – plan your finances with confidence.

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Reminder! In 2025, the UK introduced major immigration reforms – new rules for visas, citizenship, employment, and education. We’ve already covered how these changes affect migrants and what to expect next.