UK employment income is taxed through PAYE: income tax at 20/40/45% bands above the £12,570 personal allowance (which tapers away above £100,000), plus employee National Insurance at the post-2024 reduced main rate, while employers pay their own NI at a higher rate above a low threshold. Auto-enrolment puts every eligible employee into a workplace pension at a minimum 8% combined contribution. For internationals the biggest recent change is the abolition of the non-dom remittance regime: new arrivals now get the FIG regime — four years of UK tax exemption on foreign income and gains — after which worldwide taxation applies in full.
The UK quietly rebuilt its expat tax deal. The centuries-old non-dom system died in April 2025; in its place stands a residence-based regime whose headline is generous and time-boxed: four years of foreign income and gains free of UK tax for genuinely new arrivals, then full worldwide taxation like any Briton. Layer that on top of a payroll system — PAYE, National Insurance, auto-enrolment pensions, student-loan-style deductions — whose tax codes confuse even locals, and the case for understanding your payslip before your first one arrives makes itself. This guide covers the 2026 stack: bands and the £100k trap, NI on both sides, pensions worth far more than they look, the FIG regime and split-year arrival rules, and the employer’s total cost.
What are the UK income tax bands?
England/Wales/NI: 0% to £12,570 (personal allowance), 20% basic rate, 40% above the higher-rate threshold, 45% additional rate at the top — with the allowance tapering to zero between £100,000 and £125,140, creating a notorious ~60% effective band. Scotland sets its own, more graduated bands.
What is the FIG regime for new arrivals?
Individuals becoming UK resident after ten years of non-residence pay no UK tax on foreign income and gains for their first four tax years — claimed on the return, with the price of losing the personal allowance for those years. From year five, worldwide income is fully taxable.
How much pension am I automatically getting?
Auto-enrolment requires at least 8% of qualifying earnings into a workplace pension — minimum 3% from the employer, the rest from you with tax relief. Many professional employers pay well above the floor and match upward; it is the most undervalued line in UK offers.
How does PAYE actually work — and what is a tax code?
PAYE withholds income tax and NI each pay period against a tax code — the personal-allowance instruction (1257L standard) that HMRC issues to your employer. New arrivals without a P45 start on emergency or 0T codes that over-withhold; the fix is completing the starter checklist accurately and watching the code correct within a cycle or two, with overpaid tax refunding through payroll automatically.
The bands: 20% basic, 40% higher, 45% additional (Scotland runs its own schedule with more bands and different thresholds — your residence, not your employer’s location, decides). The infamous distortion is the £100,000–£125,140 taper: losing £1 of personal allowance per £2 of income produces a ~60% effective marginal rate, and — for parents — £100k also cliff-edges free-childcare entitlements. Salary-sacrifice pension contributions that hold adjusted income under the line are the standard, entirely lawful answer.
Most employees never file a return — PAYE settles it — but internationals often must: FIG claims, foreign income after year four, higher-rate relief on some pension setups, and self-employment all trigger Self Assessment with its January 31 deadline. Register early; HMRC’s UTR issuance is not a same-week affair.
What is National Insurance, and what does it buy you?
Employee NI applies above the primary threshold at the main rate (cut in 2024 to 8%) up to the upper earnings limit, then 2% beyond; it funds state pension entitlement, and each qualifying year moves you toward the 35 years needed for the full new State Pension. Employer NI is the bigger levy — raised in 2025 to 15% above a lowered £5,000 threshold — and is invisible on your payslip while shaping every UK salary offer.
For internationals the coordination rules matter: EU/EEA arrivals under the post-Brexit protocol and nationals of the ~50 reciprocal-agreement countries can remain in home systems on temporary postings via certificates of coverage, mirroring the totalization logic from our US guide; everyone else simply pays in, and short UK careers bank partial state-pension years that reciprocal agreements or voluntary top-ups can later complete.
The famous expat arbitrage survives: voluntary Class 2/3 contributions let leavers keep buying state-pension years from abroad at modest cost — among the best-returning annuity purchases available anywhere. Departing expats who ignore it leave a genuinely valuable option on the table.
How does the FIG regime work for new arrivals — and what died with non-dom?
From April 2025 the remittance basis is gone: domicile no longer drives income tax. Its replacement, the Foreign Income and Gains (FIG) regime, gives anyone becoming UK tax resident after ten consecutive years of non-residence a four-tax-year window in which foreign income and gains are simply exempt — remit them, spend them, invest them in the UK; it does not matter.
The claim is annual via Self Assessment, and the price is losing the personal allowance and CGT annual exempt amount for claim years — trivial against material foreign income, meaningful for those with little. Transitional features (temporary repatriation facility for pre-2025 non-doms) and the parallel shift of inheritance tax to a long-term-residence test complete the reform; anyone with trusts or legacy remittance-basis history needs bespoke advice, not articles.
Planning consequences for a four-year window: crystallize foreign gains and receive foreign dividends inside the window; consider accelerating home-country bonuses and vesting into it; and calendar year five in advance — the cliff from exempt-worldwide to fully-taxed-worldwide is the sharpest in this series, and arriving employees who structure equity and investment income around it keep five figures that sleepwalkers lose.
How do workplace pensions really work — and should expats bother?
Auto-enrolment is opt-out, not opt-in: eligible employees join the workplace scheme automatically at a statutory minimum of 8% of qualifying earnings (≥3% employer), with professional employers commonly at 5–10% employer contributions or generous matching. Contributions get full income-tax relief; the annual allowance (£60,000, tapered at very high incomes) caps the total.
The ‘I’m only here five years’ objection fails arithmetic: the employer contribution is unconditional extra pay, the tax relief is immediate, and the pot — a personal DC account with providers like Aviva, L&G, or Nest — remains yours forever: it stays invested after you leave, consolidates easily, and can transfer abroad to a QROPS (recognized overseas scheme) in defined cases, though transfer-charge rules make staying-put the usual answer.
At retirement, treaties generally assign taxing rights over pension income to your then-residence country, and the 25% tax-free lump sum interacts with foreign rules differently per treaty — a file-it-for-later fact. The action item now is simpler: never opt out, capture every matched pound, and use salary sacrifice where offered.
What else lands on the payslip — student loans, benefits in kind, equity?
Three recurring lines surprise internationals. Student loan deductions apply only to UK student-loan holders — but returning British-educated expats rediscover Plan 2/Plan 5 deductions at 9% above thresholds. Benefits in kind (private medical insurance, company cars) are taxed via payroll or P11D — the private health cover most professional employers provide is genuinely valuable (see our UK relocation guide on NHS versus private reality) and costs you only the tax on its premium.
Equity compensation: RSUs tax as employment income at vest through payroll (with NI — making salary-sacrifice-style planning around vests relevant), unapproved options at exercise, while UK tax-advantaged schemes (EMI for smaller companies, CSOP, SAYE) offer capital-gains treatment worth genuine money — ask which scheme yours is before valuing an offer.
Cross-border earners add the sourcing layer: equity earned partly abroad apportions by workdays, treaty relief applies to double-taxed slices, and Overseas Workday Relief — retooled alongside FIG — can exempt earnings for non-UK duties in the early years for qualifying arrivals. Keep the workday calendar; every guide in this series says it because every tax authority asks for it.
What does an employee cost a UK employer?
Stack above gross salary: employer NI at 15% above the £5,000 threshold (partially offset for small employers by the Employment Allowance), pension contributions (3% floor, 5–10% typical professional practice), the Apprenticeship Levy (0.5% of pay bill above £3m), private medical and other benefits, and — for sponsored hires — the visa cost stack from our UK visa guide: licence, CoS, Immigration Skills Charge, and commonly the fees and IHS.
Realistic loading: 15–22% above salary for a domestic professional hire, plus low-thousands annually for a sponsored one — heavier than the US on statutory items, lighter than the Netherlands or Germany, with the 2025 employer-NI rise having visibly repriced UK hiring plans.
For CFO comparisons across this series: the UK trades mid-level employer costs for high employee-side transparency — no hidden social wedges, one payroll system nationwide (Scottish bands aside), and a tax authority whose digital estate (personal tax accounts, real-time information) makes compliance boring in the best way. The expensive surprises live in the visa stack and the equity/NI interaction, both plannable.
What does the Statutory Residence Test decide — and why does arrival timing matter?
UK tax residency is mechanical: the Statutory Residence Test runs automatic-overseas tests, automatic-UK tests (183 days, only-home, full-time-work), and the sufficient-ties tiebreaker scaling permitted days against your UK connections. Arrivals mid-tax-year usually claim split-year treatment, taxing worldwide income only from the UK part — case-based, not elective, so the facts of your move (home, family, work start) set the date.
Timing levers are real money: arriving early April versus late March flips a whole tax year of foreign income in or out of UK scope; bonuses and vesting from the old country pay attention to the split date; and the FIG four-year clock starts at first residence year, making the arrival-year analysis the master calendar for everything in this guide.
Departure mirrors it: split-year on leaving, the temporary-non-residence anti-avoidance rules (five-year rule) that claw back gains and income realized during short absences, and the P85/Self Assessment leaver mechanics. One professional consultation at each end of the UK chapter, timed before the move, remains the cheapest tax planning in this series.
Frequently Asked Questions
Do I need to file a UK tax return as a regular employee?
Usually not — PAYE settles standard salary. You must file if you claim FIG or Overseas Workday Relief, have foreign income after the window, earn above the child-benefit or £150k notification thresholds, have untaxed income, or are self-employed. When in doubt, register — late-filing penalties are automatic and unsympathetic.
How is my foreign rental property taxed in the UK?
Inside your FIG years: not at all, if you claim. Afterwards: worldwide taxation applies — UK tax on the net rental profit with credit for foreign tax paid under the treaty. UK property itself is always taxable regardless of regime, including for non-residents.
What happens to my NI years if I leave after four years?
They wait: state-pension entitlement needs ten qualifying years minimum, and reciprocal agreements can aggregate periods for some nationalities. The high-value move is voluntary contributions from abroad to keep years accruing — check your NI record and the Class 2 eligibility rules before departure while access is easy.
Is Scotland really taxed differently?
Yes — Scottish resident employees pay Scottish income tax rates (more bands, higher top rates at upper incomes) on employment income, while NI, savings, and dividend taxation stay UK-wide. Your S-prefixed tax code follows your home address; cross-border commuters should check which side of the line HMRC thinks they live on.
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