Other taxes

Reino Unido

Other taxes

Actualizado el:
30/7/2025

Value Added Tax (VAT)

Tax Types

General rate: 20%, applicable to most goods and services.

Reduced rate: 5%, applicable to certain supplies, such as fuel and electricity for domestic use.

Zero rate (0%): Applicable, among others, to food, public transport, books and printed and electronic publications, as well as to exports and other essential goods and services.

Exemptions: Certain categories, such as land, insurance, financial services, education, cultural and health services, are exempt from VAT.

Note: Transactions subject to the zero rate allow the recovery of the VAT incurred, unlike exempt transactions, which do not allow such recovery.

Registration and Thresholds

The general threshold for mandatory registration in the VAT regime is 90,000 GBP annual income in taxable income. Small businesses with taxable incomes of less than 150,000 GBP they can opt for a fixed rate regime, with predetermined rates depending on the sector of activity. Entities not established in the United Kingdom are subject to a zero registration threshold, which implies the obligation to register from the first taxed transaction in the country. The obligation to register may arise both for local sales and for the import or purchase of goods and services subject to VAT.

Territoriality Rules

In the case of goods, the transaction is considered to have been carried out in the place where they are physically located at the time of delivery.

In the case of services:

  • In business-to-business (B2B) transactions, the place of provision is that of the customer, and the taxable person's investment mechanism applies.
  • In business-to-consumer (B2C) transactions, the place of provision is that of the provider, with certain exceptions (such as electronic services, telecommunications and broadcasting), where the place will be that of the consumer.

These rules are still influenced by European Union legislation, especially with regard to the determination of the place of the operation.

Statements and Accounting

VAT returns must generally be filed on a quarterly basis, although certain companies may be required to file monthly returns or may opt for an annual return. The use of digital media for filing returns and keeping records is mandatory, through software compatible with the British Tax Authority's application programming interface (HMRC). There are simplified regimes, such as annual accounting or cash accounting, for companies with annual revenues of less than 1,350,000 GBP (not including VAT).

Effects of Brexit and Northern Ireland

After Brexit, Northern Ireland maintains the EU's regulatory framework with regard to VAT on goods, in accordance with Northern Ireland Protocol and, since April 2024, at Marco de Windsor. Transactions between Great Britain (England, Scotland and Wales) and Northern Ireland are treated as imports and exports. A system has been introduced of “Green Lanes”, which facilitates the movement of goods between Great Britain and Northern Ireland destined exclusively for the Northern Irish market, reducing controls and customs formalities.

The Windsor Framework also allows for UK changes in VAT and excise duties to be applied to Northern Ireland and introduces a mechanism (“Stormont Brake”) for the Northern Irish Assembly to limit the application of certain new EU rules.

Distance Selling and Cross-Border Trading

As of January 1, 2021, the relief for low-value shipments in the United Kingdom has been lifted for imports under 135 GBP. Consequently, foreign suppliers who sell directly to British consumers must register for VAT in the United Kingdom for such transactions. In Northern Ireland, a partial relief is maintained for remote shipments not exceeding 15 GBP. The provision of services between the United Kingdom and the European Union is now considered to be services provided to a third country, and are subject to the corresponding VAT regime in the United Kingdom.

Harmonization and Applicable Legislation

The Retained EU Law (Revocation and Reform) Act 2023 provides for substantial changes in the application of European Law in the United Kingdom. To avoid the repeal of key rules related to VAT, the Finance Act of 2024 has confirmed the continuity of legislation derived from EU law in matters of VAT, excise duties and customs duties.

Digital Services Tax

In the absence of a definitive international agreement to address the fiscal challenges derived from the digitalization of the economy — in particular, within the framework of the two-pillar approach proposed by the OECD — the United Kingdom has provisionally implemented a Tax on Digital Services. This transitional measure is intended to tax revenues generated by certain digital activities, depending on the value that these companies obtain from the participation of users located in the United Kingdom.

Since April 2020, the DST has been applied with a tax rate of 2% on annual gross revenues generated in the United Kingdom by digital companies whose activities fall within the following areas: Internet search engines, social media platforms and/or online marketplaces.

The tax only applies to companies whose annual global turnover exceeds 500 million GBP, and whose revenues attributable to users in the United Kingdom in connection with the activities described above exceed 25 million GBP annually. Companies that incur losses are exempt from the tax, and an effective reduction in the tax rate is expected for companies with very low profit margins, in order to avoid a disproportionate tax burden.

The Government of the United Kingdom has reiterated, most recently in the Autumn Budget Statement of 2024, that the application of the DST is temporary and will be eliminated once an appropriate and consensual international solution enters into force within the framework of the OECD.

Customs and Excise Duties in the United Kingdom

Many goods imported into the UK from outside the European Union are subject to customs duties. The applicable tariffs are determined in accordance with the Common Customs Tariff of the European Union and may vary significantly depending on the nature of the product.

Excise duties apply to most petroleum products, alcoholic beverages and tobacco products, whether they are produced or imported into the United Kingdom. It should be noted that the tax structure on alcoholic beverages was subject to a reform as of August 1, 2023.

Following the end of the Brexit transition period on December 31, 2020, business operations between Great Britain and the European Union are considered imports and exports. Under the Northern Ireland Protocol (PNI), this region enjoys a differentiated customs status:

EU goods imported to the UK through Northern Ireland are considered domestic goods, so they are not subject to import duties. However, specific anti-tax avoidance measures have been implemented to prevent goods from transiting through Northern Ireland for the sole purpose of avoiding UK customs duties. Non-EU goods entering the United Kingdom through Northern Ireland are subject to the rights established by EU customs regulations.

There is the deferral of rights account, which are rules that allow merchants established in the United Kingdom to use a deferral of rights account without the need for a Global Customs Guarantee, provided that they have obtained an exemption from the HMRC.

Deferred VAT accounting helps merchants registered for VAT purposes who do not postpone their import declarations — or who do not meet the necessary requirements for this purpose — can continue to use the deferred VAT accounting mechanism if they so choose.

Excise Tax Movement Control System (EMCS)

As a result of Brexit, the United Kingdom has lost access to the EMCS's intra-community reporting function. However, the system is still operating within the United Kingdom and applies only to internal movements under tax suspension, including transfers between warehouses and ports.

Importers who wish to transport goods under a suspensive regime must be authorized as Registered Shippers (or hire one), in order to declare such goods in the EMCS from the port of import. In these cases, a guarantee of the movement of excise duties (where appropriate) will be necessary to cover the journey to the corresponding warehouse.

Common Transit Agreement

As of January 1, 2021, merchants using the Common Transit Agreement for import or export operations must comply with all transit procedures established by current regulations.

Tax on the Sugary Beverages Industry

The United Kingdom government introduced, with effect from April 2018, legislation aimed at encouraging the reformulation of beverages with a high content of added sugars, by applying a unitary tax to domestic producers and importers of such beverages.

The tax is applied as follows:

  • For beverages containing at least 5 grams but less than 8 grams of sugar per 100 milliliters, it is taxed at a rate of 0.18 GBP per liter of prepared beverage.
  • For beverages containing 8 grams or more of sugar per 100 milliliters, SDIL is taxed at a rate of 0.24 GBP per liter of prepared beverage.

An exemption is contemplated for small producers.

Stamp Taxes in the United Kingdom

Shares

  • A stamp duty of 0.5% is applied on instruments that formalize the purchase and sale of shares.
  • Contracts for the sale of shares are also subject to the Stamp Duty Reserve Tax (SDRT) of 0.5%.
  • The SDRT payment can be canceled by paying stamp duty corresponding to a formal transfer form.
  • The issue of shares is not usually subject to stamp duty.
  • Transfers of shares to clearing services or deposit receipt systems not linked to capital issues may be subject to the 1.5% SDRT.
  • Bearer shares are also subject to a 1.5% stamp duty.

Real Estate: United Kingdom and Northern Ireland

a) Non-residential or mixed land and buildings

Subject to the Stamp Duty Land Tax (SDLT) with progressive rates of up to 5%, applicable to the part exceeding 250,000 GBP.

b) Housing

  • Companies and legal entities, as well as individuals who acquire second homes, are subject to rates of up to 17% (previously 15% as of October 31, 2024).
  • Individuals who acquire their only or new primary residence are subject to a maximum of 12%.
  • Purchases by non-resident buyers are subject to an additional 2% surcharge, which can bring the total burden to 19%.

c) Commercial leases

  • SDLT of 1% on the Net Present Value of rents between 150,000 GBP and 5 million GBP.
  • SDLT of 2% on NPV above 5 million GBP.
  • Any premium paid is subject to progressive rates of up to 5%.

d) Residential leases

  • 1% tax on NPV for incomes exceeding 125,000 GBP.
  • Premiums paid may be subject to rates of up to 17%.

Scotland: Land and Building Transaction Tax

  • Residential: progressive rates of up to 12%, applicable to amounts greater than 750,000 GBP.
  • Additional Housing Supplement (ADS): 8% surcharge (previously 6% through December 5, 2024).
  • Non-residential: rates up to 5%, applicable above 250,000 GBP.
  • Non-residential leases:
    • It applies to the NPV of income for the first five years.
    • Graduated rates up to 2% if the NPV exceeds 2 million GBP.
    • The premium is taxed at absolute ownership rates.
    • An additional LBTT declaration is required every third anniversary of the lease.

Wales: Land Transaction Tax (LTT)

  • Residential: graduated rates of up to 12% on amounts over 1.5 million GBP.
  • Additional surcharge (for second homes or legal entities): 5% (previously 4% until December 11, 2024).
  • Non-residential: rates up to 6% for amounts exceeding 1 million GBP.
  • Non-residential leases:
    • The NPV is taxed on income for the first five years.
    • Graduated rates up to 2% if the NPV exceeds 2 million GBP.
    • The premium is taxed at absolute ownership rates.
    • LTT does not apply to the rental NPV in residential leases.

Annual Tax on Wrapped Homes

In this case, it is a tax that applies to residential properties located in the United Kingdom whose value exceeds 500,000 British pounds, when such properties are in the hands of non-natural entities, such as corporations, funds or other legal structures.

As of April 1, 2023, the tax base is determined based on the date of acquisition:

  • For properties purchased before April 1, 2022, the market value as of that date is used.
  • For properties purchased after that date, the acquisition value is taken.

As of April 2025, the minimum tax is 4,450 pounds per year for properties valued at 500,000 pounds, while the maximum is 292,350 pounds annually for properties of 20 million pounds or more.

There are applicable exemptions and reliefs. The most relevant include cases where the property:

  • It is leased to third parties on commercial terms.
  • It is part of the inventory of a company dedicated to the sale of properties.
  • It is the property of a charity or a public body.

As for capital gains, the specific regime for associated profits (taxed at 28%) was eliminated as of April 6, 2019. Since then, such gains have been subject to the general regime of capital gains on real estate in the United Kingdom for non-residents, which covers all real estate provisions, regardless of the nature of the owner.

Payroll taxes in the United Kingdom

In the United Kingdom, there are no specific payroll taxes that must be paid directly by the employer, other than Social Security contributions, which are detailed in another section.

However, employers do have a number of tax obligations related to managing compensation. The most prominent is the system application Pay As You Earn, through which they must withhold the corresponding income tax from their employees at source and transfer it directly to the Tax Administration (HMRC).

In addition to PAYE, employers may also be required to make other deductions from wages, such as those derived from court orders, garnishments, or specific legal provisions.

Overall, although the direct tax burden on the payroll is limited, the employer assumes a central role in complying with the tax and legal obligations associated with the payment of salaries.

Employer contributions to Social Security

Employers in the United Kingdom are required to make Social Security contributions (National Insurance Contributions or NICs) based on the income of each employee. For the fiscal year ending April 5, 2025, the applicable rate is 13.8% on all weekly earnings exceeding 175 GBP.

Tax for apprenticeship training

Employers must contribute 0.5% of their annual wage bill exceeding £3 million, with the aim of funding a fund to support apprenticeship training programs.

Contribution to the Pension Protection Fund

All defined benefit pension plans make a contribution that is calculated based on the fund's liabilities and the financial risk of the employing company. This contribution is intended to finance a backup fund for retirees and workers enrolled in plans that cannot be fulfilled.

Bank Tax

Bank tax is an annual tax that is levied on certain liabilities of most banks and mortgage credit firms based in the United Kingdom. As of January 1, 2021, this tax is calculated as follows:

  • 0.10% of the bank's relevant short-term liabilities
  • 0.05% of equity and long-term liabilities.

This tax does not affect the first 20 billion pounds of taxable liabilities and cannot be deducted from corporate tax. In addition, since 2021, overseas branches and subsidiaries of British companies are exempt from this tax.

On the other hand, bank benefits are also subject to a 3% supplementary tax on profits exceeding 100 million British pounds, applicable to accounting years beginning on or after April 1, 2023. Before this date, this surcharge was 8% for benefits in excess of 25 million pounds sterling. Companies whose fiscal year ends on April 1, 2023 must adjust their profits to correctly calculate this tax.

Insurance Premium Tax

The Insurance Premium Tax, with a standard rate of 12%, applies to the premiums of most general insurance, such as those for buildings, contents and cars, provided that the insured risk is in the United Kingdom. Life and other long-term insurance are exempt, although there are special regulations against fraud in long-term health care policies.

As part of these measures, a higher rate of 20% applies to certain insurance offered by specific providers, such as insurance against mechanical breakdowns, travel insurance (regardless of the provider), insurance sold in conjunction with television services or car rentals, and insurance for the protection of non-financial guaranteed assets sold through dealers or partners in the automotive sector.

In addition, there are rules to prevent abuses related to administration fees or other charges linked to insurance contracts, especially when these are managed through brokers or intermediaries in separate contracts.

Airport Tax for Passengers

All people traveling by plane from the United Kingdom must pay an airport tax, which is usually included in the cost of the ticket. In the case of business trips, this tax is usually borne by employers.

In addition, there are higher fares for certain flights on business aircraft.

Environmental Taxes

In the United Kingdom, there are several taxes aimed at protecting the environment, including:

Landfill Tax

This tax taxes the disposal of waste in landfills. As of April 1, 2025, the general rate will increase from 103.70 GBP to 126.15 GBP per ton. For inert waste, the rate will be increased from 3.30 GBP to 4.05 GBP per ton.

Climate Change Tax

This tax applies to energy consumed in the country, including electricity, gas and coal, with rates that vary depending on the type of fuel. There are exemptions and reduced rates for home users, charities, renewable energy and high-consumption sectors that implement efficiency and emission reduction measures.

Tax on aggregates

Gravel is the extraction or import of materials such as sand, gravel and crushed rock for commercial purposes. The current rate is 2.03 GBP per ton, which will increase to 2.08 GBP per ton from April 1, 2025. In addition, this tax is being considered to be managed from Scotland as of April 2026.

Carbon Reduction Commitment

This mandatory program is aimed at large companies, encouraging them to improve their energy efficiency through financial, reputational and behavioral motivations.

Tax on Plastic Packaging

Since April 1, 2022, a tax has been imposed on the production and import of plastic containers containing less than 30% of recycled material. The rate was 210.82 GBP per ton in 2023 and is scheduled to increase to 217.85 GBP in 2024 and 223.69 GBP in 2025.

Local Municipal Taxes

Municipal taxes in the United Kingdom are not calculated on income, but are applied to the occupants of commercial properties, based on an estimated value of the annual rent of each property. These taxes, known as business rates, are managed by local authorities, not by the central government.

The amounts paid for these rates can be deducted from corporate tax, provided that the usual requirements for their deduction are met.

Tax on Foreign Income on Intangible Assets

It is a tax in force since April 6, 2019, it taxes income generated in the United Kingdom by intangible assets when the beneficiary is a person not resident in the country. However, a law has been passed to eliminate this tax as of December 31, 2024.

This tax applies a 20% rate on gross income and capital derived from the use or exercise of rights to intangible assets — such as licenses — that facilitate or promote sales within the United Kingdom, provided that:

  • The recipient does not reside in the United Kingdom or in a territory with a full tax treaty with the United Kingdom.
  • None of the established exemptions apply.

The main exemptions included are:

  • Companies with UK sales of less than £10 million in the fiscal year.
  • Companies whose income tax in their country of residence is at least half of what would be applied in the United Kingdom (although this condition can be difficult to meet).
  • Companies that carry out all their activities of creating, developing and maintaining intangible assets in their country of residence and that have not acquired the asset from related parties.
  • Companies in territories without a full tax treaty with the United Kingdom, provided they are on a specific list of excluded territories and meet additional conditions (list not yet published).
  • Negligible sales in the United Kingdom related to intangible assets when made through unrelated persons.

In addition, the regime includes mechanisms to avoid double taxation when intangible assets are licensed within business groups and special rules for corporations receiving these revenues.

Recent legislative change!

In November 2023, the government announced the elimination of the tax as of December 31, 2024. This measure, included in the Finance Act of 2025, is implemented in conjunction with the introduction of the Business Tax Payment Rule regime, which seeks to combat aggressive international tax planning more effectively.

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Jordi Quintana
Tax Consultant - Specialist in international taxation and business in the Middle East - Founder at IBERICO
jordi@gestoriaiberico.com
Saul Hidalgo
Tax advisor and lawyer - Specialist in international taxation, tax processes in Spain and former Director at La Caixa - Legal and Financial Director at IBÉRICO
saul@gestoriaiberico.com
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