Corporate Tax
In the UK, the corporation tax rate depends on profits. For 2025, companies with profits over £250,000 pay the main rate of 25%, while those with profits up to £50,000 benefit from a 19% “small profits” rate. A tapered (marginal) relief applies to profits between £50,000 and £250,000. (Associated or group companies have reduced thresholds.) For example:
Taxable Profit
Corporation Tax Rate
Up to £50,000
19%
£50,001 – £250,000
Sliding scale (Marginal Relief)
Over £250,000
25%
This top rate was increased from 19% in April 2023. The government has signalled stability, capping the rate at 25% and keeping R&D and Patent Box reliefs intact.
Personal Income Tax
UK income tax is charged in bands (England, Wales, NI; Scottish rates are different). For 2025/26 the bands are as follows. (Personal Allowance £12,570):
Band
Taxable Income
Tax Rate
Personal Allowance
£0 – £12,570
0%
Basic rate
£12,571 – £50,270
20%
Higher rate
£50,271 – £125,140
40%
Additional rate
Over £125,140
45%
Income above the personal allowance (fixed at £12,570) is taxed at 20%, 40% or 45% depending on the band. (The Scottish rates are 19–48% on different bands.) These thresholds are frozen until 2028.
Dividend Income
Dividends have a separate allowance (£500 per year) and tax rates. For 2024/25 (likely unchanged in 2025), dividends are taxed at 8.75% (basic-rate band), 33.75% (higher-rate), or 39.35% (additional-rate).
Capital Gains
From 6 April 2025, capital gains are taxed at 18% (basic-rate taxpayers) or 24% (higher/additional-rate) on most assets. Gains on residential property (beyond the private home exemption) are also 18%/24%. The annual exempt amount (tax-free allowance) is now £3,000 (down from £6,000 in 2024).
Other Taxes
Inheritance Tax remains 40% above a £325,000 threshold (frozen), but note this is outside the 2025 budget changes. The VAT system has three rates: standard 20%, reduced 5%, and zero-rate 0% (on things like most food, children’s clothing, books). No VAT rate changes were announced. The VAT registration threshold was raised to £90,000 from April 2024.
National Insurance (Social Security)
Employees and employers pay Class 1 NICs on earnings. For 2025/26
Employees (Class 1 primary)
No NICs are due on earnings up to £12,570/year (the Primary Threshold), then 8% on earnings from £12,570 up to £50,270, and 2% above £50,270. (These thresholds align with the income tax allowance and higher-rate threshold.)
Employers (Class 1 secondary)
No NICs on the first £5,000/year of each employee’s pay (Secondary Threshold, cut down from £9,100). Above £5,000 the rate is 15% on all earnings. (This was increased from 13.8% in April 2025.)
Reforms
As of April 2025, the employer NIC rate rose to 15% and the threshold dropped to £5,000. To ease this for small businesses, the Employment Allowance (which lets eligible employers offset NIC liability) was raised from £5,000 to £10,500 in 2025. The eligibility cap (£100k wage bill) was removed.
Payroll Taxes & Obligations
UK employers must operate the PAYE system, deducting income tax and NICs from wages in real time and reporting to HMRC each pay period. Key obligations include:
PAYE & RTI
Employers withhold income tax/NICs under PAYE and file returns via Real Time Information. Employer NICs: As above (15% on earnings over £5,000).
Employer NICs
As above (15% on earnings over £5,000).
Pensions (Auto-enrolment)
Employers must enrol eligible employees into a workplace pension and contribute at least 3% of qualifying earnings (employees contribute 5%, making 8% total). Qualifying earnings for 2025/26 are roughly £6,240–£50,270.
Apprenticeship Levy
Large employers (annual payroll above £3 million) pay 0.5% of the entire paybill into the Apprenticeship Levy; smaller employers pay nothing (but get a £15k credit).
Real-Time Reporting
Any benefits or expenses given to employees (e.g. company car, health insurance) incur Class 1A NICs that employers report once a year (by 19 July) on form P11D.
Record-keeping
Payroll and holiday records must be maintained, and payslips provided to employees.
Employment Rules (Working Conditions & Leave)
UK labour law sets minimum standards on hours, pay and leave:
Minimum Wage: From 1 April 2025 the National Living Wage (for workers 21+) is £12.21/hour. Other rates are £10.00 (18–20-year-olds) and £7.55 (16–17-year-olds and apprentices). (These were the Low Pay Commission’s October 2024 recommendations. The Government plans further increases toward £12 by 2026.)
Working Hours: The standard maximum is 48 hours per week on average (averaged over a 17-week period); workers may “opt out” by agreement. Daily working hours are capped at 9 hours, and night workers have tighter limits (8 hours average). Employers must give at least 11 hours’ rest between working days and one uninterrupted 24-hour rest per week (48 hours per fortnight).
Breaks: Any worker working over 6 hours a day is entitled to an unpaid 20-minute break. For example, a 10-hour shift must include at least one 20-min break (in practice often an unpaid meal break, plus paid rest breaks if in contract).
Annual Leave: Full-time workers accrue 5.6 weeks paid holiday per year by law. For someone working 5 days/week this means 28 days paid holiday (this can include the 8 UK bank holidays). Part-timers get a pro‑rata amount. Employers may offer more, but 5.6 weeks (28 days) is the statutory minimum.
Sick Leave: Eligible employees can claim Statutory Sick Pay (SSP) for up to 28 weeks. The rate is £118.75 per week (as of April 2025). (This is paid by the employer through payroll; higher earners or those on maternity/sick leave may have higher contractual sick pay from employers.)
Maternity/Parental Leave: Pregnant employees can take up to 52 weeks’ maternity leave. Statutory Maternity Pay (SMP) covers up to 39 weeks: 90% of average earnings for the first 6 weeks, then £187.18/week (or 90% if lower) for the next 33 weeks. Fathers or partners are entitled to 1 or 2 weeks’ paid paternity leave, paid at £187.18/week (or 90% of average pay, if lower). There are also provisions for adoption leave and shared parental leave/pay which effectively split maternity entitlements between parents. (Statutory rates for paternity/shared leave match SMP’s flat rate, see GOV.UK guides.)
Notice and Termination: After one month’s service, the statutory minimum notice to quit is one week (by either party). This rises by one week per additional year of service up to 12 weeks (for 12+ years’ service). Employees with at least 2 years’ continuous employment qualify for redundancy pay. Statutory Redundancy Pay is age-related: up to 0.5 week’s pay per year under 22, 1 week’s pay for ages 22–40, and 1.5 weeks’ pay for 41+, capped at 20 years of service (with a weekly pay cap of £643 as of April 2024). Employers must follow a fair process for redundancy (consultation, selection) or risk unfair dismissal claims. (Note: the government has proposed extending unfair dismissal rights to day one of employment in future reforms, but this is not yet in force.)
Recent 2025 Updates
The latest Budget and Autumn statements introduced several changes for 2025. Notably, employer NICs rise from 13.8% to 15% (from April 2025) and the employer NIC threshold is lowered to £5,000. The National Living Wage was increased to £12.21/hr in April 2025. Flexible working regulations now allow any employee to request flexible hours from their first day on the job (extended in April 2024), and off-payroll (“IR35”) rules were fully rolled out to all companies by April 2024. The Dividend Allowance (tax-free threshold) was reduced to £500 in April 2023, and the Capital Gains allowance is now £3,000. Future reforms under the new government include plans to raise the minimum wage further and expand worker rights (e.g. gig-economy protections), but many such proposals (e.g. day-one unfair dismissal rights) are under consultation.
Sources: Official UK Government publications and tax guides (rates from GOV.UK and HMRC) have been used for all figures gov.uk researchbriefings.files.parliament.uk acas.org.uk , along with professional analyses mha.co.uk researchbriefings.files.parliament.uk . These ensure the above rates and rules are up-to-date for 2025.
