Income Tax UK vs US: Rates, Bands and Who Pays More

Income tax in the UK vs the US is a comparison of two systems that start from different places: the UK taxes the individual on income from 6 April to 5 April, with a tapering personal allowance and three main bands; the US taxes the household on a calendar year, with a standard deduction, seven federal brackets and, in most states, a second layer of state income tax. For anyone who files in both countries, the comparison is not academic. It decides how much foreign tax credit you have and which country ends up with the money.

This guide sets out the 2026 figures from both tax authorities side by side, the structural differences that matter more than the rates, and what the comparison means for a US citizen in Britain or a Brit in America. It sits alongside our guide to handling the mismatched tax years and our cross-border tax planning service.

What are the UK income tax bands for 2026/27?

GOV.UK's income tax rates page confirms the current tax year runs from 6 April 2026 to 5 April 2027 and gives the bands for England, Wales and Northern Ireland:

Band	Taxable income	Rate
Personal allowance	Up to £12,570	0%
Basic rate	£12,571 to £50,270	20%
Higher rate	£50,271 to £125,140	40%
Additional rate	Over £125,140	45%

Two features have no US equivalent. The personal allowance is reduced by £1 for every £2 of adjusted net income above £100,000, so it is gone at £125,140; the effect is a marginal rate of 60% on income between those two figures, a trap that our tax planning service is often asked to work around. And there is no joint filing: a couple is two taxpayers with two allowances, whatever their relative incomes. Scotland sets its own bands for earned income; dividends and savings have separate rates and allowances.

What are the US federal tax brackets for 2026?

The IRS's 2026 inflation adjustments set the standard deduction at $16,100 for single filers, $32,200 for married couples filing jointly and $24,150 for heads of household, and the brackets as follows:

Rate	Single: taxable income over	Married filing jointly: taxable income over
10%	$0	$0
12%	$12,400	$24,800
22%	$50,400	$100,800
24%	$105,700	$211,400
32%	$201,775	$403,550
35%	$256,225	$512,450
37%	$640,600	$768,700

Then there is state income tax. Several states charge none; California's top rate is around 13%, New York State plus New York City can exceed 14% combined. A Brit comparing a London salary with a New York offer is comparing 40% UK tax against perhaps 24% federal plus 10% or more state and city, which is why our tax guide for Brits moving to the US treats the state as a first-order question.

Who pays more? Three worked comparisons

These are rough, illustrative calculations on employment income only, using the 2026 figures above, a single filer, and a flat $1.30 to £1 exchange rate for readability. They ignore National Insurance, Social Security, pension contributions and every other real-life adjustment, and they are not advice.

Salary	UK income tax (approx.)	US federal tax, single (approx.)	Add a 6% state
£40,000 / $52,000	About £5,500 (20% on £27,430)	About $4,100 (after $16,100 deduction)	About $7,200 total
£80,000 / $104,000	About £19,400 (20% band plus 40% on £29,730)	About $14,600	About $20,800 total
£150,000 / $195,000	About £53,700 (no personal allowance; 45% above £125,140)	About $37,900	About $49,600 total

The pattern holds across most of the range: UK income tax exceeds US federal income tax on the same salary, often by a wide margin at the higher-rate threshold, and state tax closes some but not all of the gap. That is the arithmetic behind the single most common outcome for Americans in Britain, a US return that shows zero federal tax after the foreign tax credit.

How do savings, dividends and capital gains compare?

Employment income is where the two systems look most alike. Investment income is where they diverge, and where a dual filer's planning lives. The UK taxes dividends at its own set of rates, lower than the earned-income bands, after a small dividend allowance, and gives a separate personal savings allowance for interest. The US taxes qualified dividends and long-term capital gains at preferential federal rates, adds the 3.8% net investment income tax above an income threshold, and taxes interest as ordinary income. The UK has an annual exempt amount for capital gains and taxes gains at rates below the income tax bands; the US has no annual exemption, but it does exempt gains on a main home up to $250,000 ($500,000 for a couple) and gives a full step-up in basis on death, which the UK does not.

Two mismatches matter most. First, the UK exempts everything inside an ISA while the US taxes it, and treats UK funds held there as PFICs with their own punitive rules. Second, the UK's private residence relief is uncapped while the US exclusion is not, so a US citizen selling a long-held London home can owe US tax on a gain HMRC ignores, with the currency gain on the mortgage on top. Our guide to cross-border investor tax reporting covers how both sets of rules land on one portfolio.

The structural differences that matter more than the rates

• Who is taxed. The UK taxes individuals who are resident; the US taxes its citizens and green card holders wherever they live, and residents of the US on worldwide income. A Brit in the US and an American in the UK are both taxed by both countries, in different ways.
• Joint filing. US married couples can file jointly, with doubled brackets and deduction. The UK has no joint return, which can make the UK more expensive for a single-earner couple and the US more expensive for two equal earners in a state with high rates.
• Deductions. Beyond the standard deduction, US filers can itemise mortgage interest, state taxes up to a cap and charitable gifts. The UK gives relief at source for pension contributions and Gift Aid but has no general deduction for mortgage interest on a home.
• What counts as income. The UK exempts ISA income entirely; the US taxes it and treats UK funds inside an ISA as PFICs. The US exempts gains on a main home up to $250,000 or $500,000 for a couple; the UK's private residence relief has no cap. Our guide to UK capital gains tax for US citizens covers the mismatch.
• Social charges. Employee National Insurance and US Social Security and Medicare taxes are separate from income tax in both countries, are not creditable against each other's income tax, and are governed by the totalization agreement when you work across the border; see our guide to the UK State Pension and US Social Security.
• Tax years. 6 April to 5 April against 1 January to 31 December. Every figure in a dual filer's return has to be allocated across the overlap.

What the comparison means for a dual filer

For a US citizen working in the UK, the UK tax on salary normally exceeds the US federal tax on the same income, so the foreign tax credit on Form 1116 usually eliminates US federal tax on employment income, with excess credits carrying forward. The alternative, the foreign earned income exclusion of $132,900 for 2026, is rarely better for a UK employee and can cost refundable child credits. Our guide to double taxation relief between the US and UK explains how the credit and the treaty fit together.

For a British resident of the US with UK income, the direction reverses: the US taxes worldwide income as the country of residence, and UK tax on, say, rental income is credited on the US return, while HMRC taxes the UK rent under the non-resident landlord rules. Where the UK rate exceeds the US rate on a particular item, the excess UK tax is simply a cost.

Two more consequences. First, because UK rates are higher, a US citizen in the UK who claims the UK's new Foreign Income and Gains regime on US-source income removes UK tax that would otherwise have been credited, and may simply end up paying the IRS instead while losing the personal allowance. Second, the UK's 60% band between £100,000 and £125,140 generates foreign tax credits that cannot all be used in the same year, which is where carry-forward planning earns its keep.

Illustrative example: an American analyst in London earns £95,000. UK income tax is roughly £25,400 for 2026/27. On the US side, after the standard deduction, federal tax on the equivalent dollar income would be around $20,000. The foreign tax credit covers it in full and leaves excess UK tax to carry forward. Her US return is required and shows no federal tax due. If her employer moved her to San Francisco on the same salary, she would pay around $20,000 federal plus California tax of roughly $8,000, and HMRC would drop out of the picture after a split year. This is illustrative only; actual figures depend on allowances, filing status and deductions.

The bottom line

On the rates alone, the UK taxes employment income more heavily than the US federal government does, and the gap is widest around the £50,000 to £125,000 range where the UK's 40% rate and allowance taper bite. US state tax narrows the difference, joint filing changes it for couples, and the two countries disagree about what counts as income in the first place. For a dual filer the practical lesson is simple: the higher-tax country sets the floor, the lower-tax country credits it, and the planning sits in the mismatches. Our Americans in the UK and Brits in the US pages cover both directions, or ask us to run your own figures.