UK vs Australia Tax: Complete Expat Guide 2025
Rebuilt with CST Tax, Tax Window, ShipIt & Sheltons (Jan 2025)
The clearest look yet at PAYE, National Insurance, Medicare, CGT, stamp duty, and retirement savings once you hop between the UK and Australia.
When the UK usually wins
- Salaries paid largely in GBP with dividends/interest that can sit inside ISA or pension wrappers
- Expats who can keep the first £12,570 tax free and stretch the dividend/savings allowance [CST Tax]
- Families who value NHS access funded through National Insurance instead of a separate levy
When Australia tends to win
- Mid-to-high earners who benefit from the $18,200 tax-free threshold plus LITO/SAPTO offsets
- Anyone valuing the compulsory 11% super contribution and no inheritance tax [ShipIt]
- Households planning long stays that unlock Medicare once the 183-day residency test is met
Quick Snapshot
🇬🇧 UK advantages
- £12,570 personal allowance + dividend/savings allowances for mixed income [CST Tax]
- No separate health levy (National Insurance funds benefits/pensions) [Sheltons]
- ISA + pension wrappers give tax-free investment growth
🇦🇺 Australia advantages
- $18,200 tax-free threshold, LITO, SAPTO, and targeted rebates [CST Tax]
- Mandatory 11% employer super on top of salary, no inheritance tax [ShipIt]
- OECD data shows Australia’s total burden is mid-pack after offsets and transfers [Tax Window]
The “cheaper” country depends on income mix, residency, and whether you prefer compulsory super contributions or flexible UK-style pension/ISA planning.
Tax Brackets (2025 UK / 2024-25 AU)
United Kingdom
| Income (£) | Rate |
|---|---|
| 0 – 12,570 | 0% |
| 12,571 – 50,270 | 20% |
| 50,271 – 125,140 | 40% |
| 125,140+ | 45% |
Class 1 NI: 10% main band, 2% above the upper earnings limit [Sheltons]
Australia
| Income (AUD) | Rate |
|---|---|
| 0 – 18,200 | 0% |
| 18,201 – 45,000 | 19% |
| 45,001 – 135,000 | 30% |
| 135,001 – 190,000 | 37% |
| 190,001+ | 45% |
Pay attention: Add the 2% Medicare levy (plus surcharge for high-income earners without private cover).
How the Systems Differ
Allowances vs offsets
UK removes income via allowances; Australia taxes first then removes tax via offsets (LITO, SAPTO). Same salary, different effective rates [CST Tax].
Tax years & residency
UK tax year = 6 Apr–5 Apr with the Statutory Residence Test. Australia = 1 Jul–30 Jun with “resides” + 183-day tests. Residency drives when worldwide income/CGT becomes taxable and whether you can use the UK’s four-year foreign income regime [CST Tax].
Total burden perception
Tax Window shows Australia’s overall tax burden is mid-table in the OECD once GST credits and transfers are factored in; visibility, not volume, drives the “high tax” narrative [Tax Window].
Social contributions
UK employees/employers pay NI on top of income tax; Australia has a 2% Medicare levy instead of payroll social taxes [Sheltons].
Residency Cheat Sheet
🇬🇧 Stay UK resident if...
- You meet the Statutory Residence Test via days in country or sufficient UK ties
- You want the four-year foreign income regime before worldwide income is fully taxed [CST Tax]
- You keep a UK home/partner/kids (ties make break tests harder)
- National Insurance years matter for future State Pension
🇦🇺 Become Australian resident when...
- You pass the “resides” test or spend 183+ days onshore in a financial year
- You plan to stay long enough to access Medicare and offsets such as LITO/SAPTO
- You’re ready for worldwide income being taxed immediately (credits available)
- Superannuation contributions + tax-free capital gains on the main home are priorities
Capital Gains, Property & Estates
Capital gains
UK CGT allowance £3k; 10%/20% on most assets (18%/24% for residential property). Australia halves gains on assets held >12 months for residents; non-residents lose the discount [Sheltons].
Inheritance & estates
UK inheritance tax 40% above £325k (rises to £500k when passing the home to descendants). Australia has no inheritance tax, but super death benefits to adult children can be taxed up to 17% and UK IHT can follow expats for years [CST Tax].
Example Salaries (£1 ≈ $1.93 AUD)
| Salary | UK take-home | Australia take-home | What to note |
|---|---|---|---|
| £40,000 | £31,610 (tax £8,390 • 21.0%) | $60,693 (≈£31,448) + $4,400 super Tax $16,507 • 21.4% |
Almost identical net pay; Australia adds compulsory super for future savings. |
| £60,000 | £43,844 (tax £16,156 • 26.9%) | $86,524 (≈£44,834) + $8,800 super Tax $29,276 • 25.3% |
Offsets keep Australia’s effective rate lower despite higher nominal brackets. |
| £100,000 | £66,844 (tax £33,156 • 33.2%) | $137,936 (≈£71,469) + $22,000 super Tax $55,064 • 28.5% |
UK personal allowance tapers out after £100k; Australia still benefits from flat Medicare levy unless surcharge triggered. |
Retirement & Expat Perks
Superannuation (Australia)
- 11% compulsory employer contribution (headed to 12%)
- Earnings taxed at 15% in accumulation, 0% in retirement
- No inheritance tax, though super death benefits to adult children can be taxed up to 17%
Workplace pensions (UK)
- Auto-enrolment 3% employer / 5% employee minimum with tax relief
- 25% tax-free lump sum; remainder taxed as income
- ISA allowance (£20k) provides parallel tax-free investing
ShipIt: UK pensions can often be transferred to Australian super tax-free (usually via QROPS) within six months of residency; otherwise FX swings and UK exit charges can apply [ShipIt].
FAQs
Do Australians really pay more tax?
No—Tax Window shows Australia’s total burden (income + GST – transfers) is average; the visibility of PAYG/levies makes it feel higher [Tax Window].
How is foreign income taxed?
Australia taxes worldwide income for residents (with credits). The UK now taxes worldwide income after the four-year foreign income regime expires—plan residency carefully [CST Tax].
What about property?
Both usually exempt your main home from CGT, but renting it out or leaving for long periods (six-year rule in Australia) can erode relief. UK SDLT vs Australian stamp duty affects upfront cost [Sheltons].
Any perks for UK expats in Australia?
ShipIt highlights no inheritance tax, tax-free sale of your Australian main residence, and generous super contribution caps for catch-up savings [ShipIt].
Calculate Your Take-Home Pay
Model PAYE, NI, Medicare, offsets, and super/pension contributions.