Fast, effortless and 100% online. Learn more
Let’s face it, there’s always competition between the UK and US. Just last month the UK and US went head to head for the Davis Cup. This time, it’s the battle of the highest taxes! So, are taxes higher in the UK or the US?
Well, both the UK and US have plenty of taxes. The main types in the UK are:
Taxes in the US are broken down into these three buckets:
Pretty simple, really!
How about a quick comparison? 👀
UK 🇬🇧
| Band | Taxable Income | Tax Rate |
| Personal allowance | Up to £12,570 | 0% |
| Basic rate | £12,571 – £50,270 | 20% |
| Higher rate | £50, 271 – £125,140 | 40% |
| Additional rate | Over £125,141 | 45% |
US 🇺🇲
| Taxable Income | Tax Rate | |
| Up to $10,275 | 10% | |
| $10,276 – $41,775 | 12% | |
| $41,776 – $89,075 | 22% | |
| $89,076 – $170,050 | 24% | |
| $170,051 – $215,950 | 32% | |
| $215,951 – $539,900 | 35% | |
| $539,901 or more | 37% |
Safe to say the income tax rates in the US are significantly less than the UK 🫠
Not necessarily! All it means is that the income tax rates are lower than the UK. ‘Better off’ is a strong statement.
Before applying for that green card, you may want to consider where and how higher taxes in the UK might just be more beneficial:
So will you be better off? We can’t give an exact (or unbiased) answer to that, but we can suggest considering whether you’ll be happier with higher wages and perhaps a cut to the quality of social security programmes.
Now we know that Americans who earn over £500,000 still only pay 37% tax, let’s have a look at some other types of tax!
Inheritance tax:
The US is made up of 50 states. Currently, there are only 6 states in the US where inheritance tax is a thing.
Estate tax is more common across the US but only applies to estates worth over $12.06 million. The standard rate is 40% but only 17 states even bother to enforce estate tax! 🤯
On the other hand, everyone in the UK except the King has to pay inheritance tax at a rate of 40% if the value of the received estate is above £325,000.
Anyone else from team UK secretly switching over to team US? 🙈
Sales tax:
This is a tax in the US that’s paid by consumers. Sales tax is imposed on retail goods such as food and clothes. Rates differ in every state but the average is around 5%. Sales tax is collected once at the final purchase, by the final customer.
So let’s compare this to a similar tax in the UK – VAT:
Confused? Let’s roll out the example! 🕺
Sloane purchases a new television for $400 in Mississippi where the sales tax is 7%:
(400 + 7% = 428) 🤓
So Sloane would have to pay $28 in sales tax.
Now, in the UK, Paul pops into PC World to buy a new printer for £100. Because the standard rate of VAT is 20%, Paul will pay an extra £20.
Just like all other taxes, when a business charges VAT or on a sale, they’re simply collecting on behalf of HMRC.
So there we have it. We’ll let you decide whether you are team UK tax 🇬🇧 or team US tax 🇺🇲 … or none! 😝
Filing tax returns in as little as just 48 hours isn’t the only thing our accredited accountants can do! They also offer professional tax advice consultations. Find out more about our services here.
Sign up for important updates, deadline reminders and basic tax hacks sent straight to your inbox.
"*" indicates required fields
Or see our Guides, Calculators or Taxopedia
