How to Plan Your Tax Payments Yourself in the UK in 2025

James
Aug 18
4 min read

Introduction to UK Individual Taxation

The UK tax system is complex, with numerous taxes, each governed by specific rules and rates. Without experience or expert guidance, navigating UK fiscal policy can be challenging. At Foundry Accounting, we provide an overview of individual taxation to help you understand the basics and specifics of the system. During a personal consultation, our experts can clarify your obligations and calculate your tax liabilities.

Meta Description: Learn how to plan your tax payments in the UK in 2025. Discover key taxes, the FIG regime, and legal ways to minimise your tax burden with Foundry Accounting.

Legal Term: ‘Resident’

The concept of residency is critical in determining tax obligations in the UK.

Residency defines your tax obligations based on your physical presence in the UK. You’re generally considered a UK tax resident if you spend 183 days or more in the UK during the tax year (6 April to 5 April). To confirm your status, take HMRC’s Statutory Residence Test annually.

The non-domicile regime was abolished on 6 April 2025, replaced by the Foreign Income and Gains (FIG) regime, which offers tax exemptions for new residents. Understanding your residency status helps identify tax optimisation opportunities.

Individual Taxation and Ways to Reduce the Tax Burden

If you live and work in the UK, you must pay taxes. The UK’s tax system is not offshore, but it offers legal ways to minimise tax liabilities, making it attractive for wealthy individuals relocating to the UK.

Key taxes for individuals include:

Income Tax: Levied on earnings like salaries and investments.
National Insurance Contributions (NICs): Funds the NHS and social security.
Value Added Tax (VAT): 20% on most goods and services.
Excise Duty: Taxes on specific goods like alcohol and tobacco.
Stamp Duty Land Tax (SDLT): On property purchases above £250,000.
Capital Gains Tax (CGT): On profits from asset sales.
Inheritance Tax (IHT): On estates above £325,000.

Many taxes are progressive, with higher earners paying higher rates. For 2025/26, the personal allowance is £12,570 (subject to adjustment), making income below this level tax-free.

Effective Ways to Minimise Tax Payments

The UK offers legal strategies to reduce your tax burden, particularly for new residents under the FIG regime.

The Foreign Income and Gains (FIG) Regime

Introduced on 6 April 2025, the FIG regime replaced the remittance basis. If you’ve been non-UK resident for 10 years before moving to the UK, you can claim a 100% exemption on foreign income and gains for your first four years of UK residency. These funds can be brought to the UK tax-free during this period, but electing FIG means forgoing personal allowances. The Temporary Repatriation Facility (TRF) allows pre-6 April 2025 foreign income and gains to be remitted at reduced rates (12% in 2025/26 and 2026/27, 15% in 2027/28).

Net Capital

Pre-existing foreign capital (“net capital”) can be brought to the UK tax-free before becoming a tax resident, provided it’s held in a separate account and documented for legal origin. Avoid mixing net capital with UK income, as HMRC taxes income first.

Personal Income Tax

Income tax rates in 2025 range from 20% to 45% for incomes over £125,140. The FIG regime allows new residents to avoid tax on foreign income for four years, reducing the need to declare worldwide income during this period. Plan carefully to avoid unintentional tax liabilities from transferring funds to the UK.

Capital Gains Tax

CGT applies to profits from selling assets like property or shares, with rates of 10–28% for individuals (based on income and asset type) and 25% for companies in 2025. The tax-free allowance is £12,300 for individuals and £6,150 for trusts. Exemptions include profits from selling your primary residence, government securities, or certain personal assets (e.g., cars, life insurance policies). Under the FIG regime, new residents pay no CGT on foreign gains for four years.

Inheritance Tax

IHT is levied at 40% on estates above £325,000 (2025 threshold). Gifts made during one’s lifetime may also be taxable. Exemptions include transfers between spouses or civil partners and a reduced rate of 36% if over 10% of the estate is donated to charity. Under the FIG regime, new residents are exempt from IHT on foreign assets for their first four years. Long-term residents (10 out of 20 years in the UK) are taxed on worldwide assets.

Filing a Tax Return and Penalties

The UK tax year runs from 6 April to 5 April. Self-assessment tax returns can be submitted by post or online (HMRC recommends online) using a Unique Taxpayer Reference (UTR), found in HMRC documents or online.

Deadlines:

31 October: For paper returns.
31 January: For online returns.

Penalties for Late Filing:

Up to 3 months late: £100 fine.
Over 3 months: £10 daily penalty plus £100.
Over 6 months: £300 or 5% of tax liability (whichever is greater).
Over 12 months: Up to 200% of tax liability in severe cases.

Individual Taxation – Advice and Services

UK taxation is complex and requires expert guidance. This article is for informational purposes only and not a substitute for personalised tax advice. Consult a tax specialist for your specific circumstances.

Foundry Accounting leads in planning and optimising tax obligations for individuals and businesses. Their services include: