Types of UK Taxes

What taxes might you come across? 

The UK has many different taxes, but a few are particularly important for young people to understand. 

​

Income Tax 

Income Tax is charged on certain types of income, including income from employment and self-employment. 

​

Most employees have Income Tax deducted through PAYE. 

​

National Insurance 

National Insurance is separate from Income Tax. Most employees pay Class 1 National Insurance when their earnings are above the relevant threshold. 

Your National Insurance record can affect entitlement to certain benefits and the State Pension. (GOV.UK) 

​

VAT 

VAT — Value Added Tax — is a tax paid on most goods and services. 

For 2026–27, the main VAT rates are: 

• 20% standard rate 

• 5% reduced rate 

• 0% zero rate 

 

Some goods and services are exempt from VAT altogether. VAT is normally already included in the price you see in shops. (GOV.UK) 

 

Corporation Tax 

Corporation Tax is paid by companies on taxable profits. 

 

For the financial year beginning 1 April 2026: 

• profits of £50,000 or less can qualify for the 19% small profits rate 

• profits above £250,000 are generally taxed at the 25% main rate 

• companies between those limits may qualify for Marginal Relief 

 

Those profit thresholds can be adjusted in some circumstances, including where a company has associated companies. (GOV.UK) 

​

Key takeaway 

Tax is not only something deducted from wages. It can also apply when you buy things, run a business, save, invest or own property.