Australia Tax vs UK Tax 2026 -- Income, Super and CGT Side-by-Side

Last reviewed: 26 April 2026

Australia tax vs UK tax is the most searched tax comparison topic among British nationals considering a move to Australia. The two systems have broad structural similarities (both progressive income tax scales, both with compulsory social insurance equivalents, both with capital gains tax) but differ materially on rates, thresholds, and treatment of pensions and superannuation. For UK nationals considering Australia, understanding the tax comparison is essential for financial planning before the move. For the full Australia relocation guide, see our moving to Australia guide. For UK tax residency rules that apply in the year of departure, see our UK tax residency guide.

A critical UK tax update affecting the Australia tax vs UK tax comparison: the Autumn Budget 2025 (announced 29 October 2025, confirmed in the OOTLAR at gov.uk) extended the freeze on UK income tax thresholds to April 2031 -- two years beyond the previously announced 2028/29 freeze date. UK income tax rates (20% basic, 40% higher, 45% additional) are unchanged, but the frozen thresholds mean more taxpayers are dragged into higher rate bands as wages rise with inflation -- increasing the effective UK tax burden without any nominal rate change. UK dividend tax rates changed from 6 April 2026 under the Autumn Budget 2025: ordinary rate is now 10.75% (was 8.75%); upper rate 35.75% (was 33.75%); additional rate remains 39.35%. These changes affect UK nationals who retain UK-listed equity portfolios while living in Australia.

Income tax rates: Australia vs UK side by side

Australian income tax rates for 2025/26 (ATO published at ato.gov.au/tax-rates-and-codes/individual-income-tax-rates): 0% on AUD 0-18,200 (tax-free threshold); 16% on AUD 18,201-45,000 (reduced from 19% following Stage 3 tax cuts effective 1 July 2024); 30% on AUD 45,001-135,000; 37% on AUD 135,001-190,000; 45% on AUD above 190,000. The Medicare Levy of 2% applies to all taxable income for Australian tax residents (with low-income reduction for individuals below AUD 26,000). UK income tax rates for 2025/26 (gov.uk/income-tax-rates): 20% on taxable income up to £37,700 (above the £12,570 personal allowance); 40% on £37,701-£125,140; 45% above £125,140. At AUD 100,000 income (approximately £52,600 at April 2026 rates): Australian tax is approximately AUD 22,067 (22.1%) plus AUD 2,000 Medicare Levy = AUD 24,067 (24.1%); UK tax on £52,600 is approximately £16,808 (32.0%) including NI on the same income. The lower Australian headline rate on moderate incomes reflects the Stage 3 tax cut changes; UK NI adds to the effective rate comparison.

National Insurance vs Medicare Levy

UK National Insurance (NI) is the UK’s compulsory social insurance contribution, which funds the NHS, State Pension, and other benefits. Employee NI for 2025/26 (HMRC gov.uk/national-insurance-rates-letters): 8% on earnings between £12,570 and £50,270; 2% above £50,270. Employer NI is 15% from 6 April 2025 (Autumn Budget 2024 increase from 13.8%). Australian Medicare Levy is 2% of taxable income for tax residents, with a low-income reduction below AUD 26,000. The Medicare Levy Surcharge (MLS) -- an additional 1.0-1.5% -- applies to high earners (AUD 93,000+) without private hospital cover. Australia has no equivalent of UK NI contributions; there are no compulsory contributions to a social insurance fund beyond the Medicare Levy. Australia’s Superannuation Guarantee (compulsory employer super contributions) partially fulfils the pension-savings function of UK NI contributions to the State Pension, but super is not a government social insurance scheme -- it is a compulsory individual retirement savings system. For a UK employee earning £50,000: NI is approximately £3,000 per year (8% on £37,430 above the lower earnings limit); for an Australian employee earning AUD 95,000 (approximately £50,000): Medicare Levy is AUD 1,900 (2%) plus no social insurance equivalent.

Superannuation vs UK pension: the key structural differences

Australia’s Superannuation Guarantee (SG) compels employers to contribute 12% of employees’ ordinary time earnings into a super fund from 1 July 2025 (increased from 11.5% in 2024/25 per ATO guidance). Super contributions are taxed at 15% within the super fund in the accumulation phase; investment returns within super are taxed at 15% (on income) and 10% (on long-term capital gains) within the fund. Super can be accessed from preservation age (60 for those born after 30 June 1964 per the SIS Act). UK pension contributions to SIPP or occupational schemes attract income tax relief at the marginal rate (20% basic, 40% higher, 45% additional) up to the Annual Allowance (£60,000 for 2025/26 per HMRC); investment returns within the pension wrapper are UK income tax and CGT-free. UK pensions can be accessed from age 55 (rising to 57 by 2028 under Finance Act 2022). The Autumn Budget 2024 measure (effective 6 April 2027) brings unused UK pension funds into the IHT estate; Australian super is generally subject to Australian superannuation death benefit rules rather than IHT. UK nationals who move to Australia should understand that their UK pension and Australian super are separate, parallel systems -- they cannot be directly merged without a QROPS transfer.

Capital Gains Tax: Australia vs UK

Australian CGT (ATO, ato.gov.au/forms-and-instructions/cgt-basic-calculations): Australia taxes capital gains as part of assessable income, at the individual’s marginal income tax rate. Assets held for more than 12 months qualify for a 50% CGT discount: the taxable capital gain is 50% of the total gain, taxed at the marginal rate. For an Australian resident in the 37% tax bracket who sells an asset with a AUD 100,000 gain (held more than 12 months): the taxable gain is AUD 50,000; the CGT is approximately AUD 18,500 (37% x AUD 50,000) -- an effective rate of 18.5%. UK CGT rates for 2025/26 (gov.uk/capital-gains-tax): 18% on residential property gains for basic rate taxpayers; 24% for higher and additional rate taxpayers. Non-residential UK assets: 18% (basic rate) and 24% (higher/additional rate) as of Autumn Budget 2024 (from 30 October 2024, CGT on non-residential assets was aligned to 18%/24%). Annual CGT exempt amount is £3,000 for 2025/26. For Australian-resident UK nationals with UK property, non-resident CGT (NRCGT) at 18-24% applies to UK property gains regardless of Australian residency; Australian CGT also applies with a credit for UK NRCGT paid under the UK-Australia DTC.

Dividend tax: Australia vs UK

Australia’s dividend imputation system (franking credits) fundamentally differs from the UK’s approach. Australian companies pay tax at the corporate tax rate (30% for large companies; 25% for base-rate entities with turnover below AUD 50 million); they attach franking credits to dividends representing the corporate tax already paid. Shareholders include the gross dividend (dividend plus franking credit) in assessable income and receive a tax offset for the franking credit. This eliminates double taxation on corporate profits at the shareholder level. For example, a fully franked AUD 70 dividend from a company that paid AUD 30 in corporate tax: the shareholder includes AUD 100 in income and receives a AUD 30 franking credit offset. UK dividend tax rates from 6 April 2026 (Autumn Budget 2025 OOTLAR): 10.75% ordinary (was 8.75%); 35.75% upper (was 33.75%); 39.35% additional (unchanged). The UK does not have a dividend imputation system; UK company profits are taxed at 25% (main UK corporation tax rate), and dividends are taxed again at the dividend rates in the hands of shareholders above the £500 dividend allowance. UK nationals in Australia with UK equity portfolios should note the new dividend rates from 6 April 2026 when calculating UK tax on UK dividends received while in Australia.

Residency rules: Australian tax residency vs UK SRT

Australian tax residency is determined by the ATO’s "resides" test (the primary test) and three additional tests: the domicile test, the 183-day test, and the superannuation test. Under the resides test, individuals who move to Australia intending to remain permanently are generally Australian tax resident from the date of arrival. Australian tax residents are subject to Australian income tax on their worldwide income; non-residents are taxed only on Australian-source income. The ATO’s residency guidance (ato.gov.au/individuals-and-families/coming-to-australia-or-going-overseas/your-tax-residency) is the authoritative reference. UK tax residency is determined by the SRT (Schedule 45 Finance Act 2013), based on day counts and connection factors. A UK national who moves to Australia and satisfies the SRT automatic overseas test (fewer than 16 UK days per year, if UK-resident in any of the prior 3 years) becomes non-UK-resident; they simultaneously become Australian tax resident under the ATO resides test. The UK-Australia DTC (1967, Protocol 2003) tie-breaker (Article 4) resolves any dual residency, applying the sequential permanent home/centre of vital interests/habitual abode/nationality test. HMRC’s DT Australia technical notes at gov.uk/hmrc-internal-manuals/double-taxation-relief/dt1801 provide the technical framework.

Tax filing obligations: T1 vs Self Assessment

Australian tax residents file an annual income tax return with the ATO (ato.gov.au); the return covers the Australian financial year (1 July to 30 June). The filing deadline for self-lodged returns is 31 October of the following year (for the year ending 30 June); tax agent-lodged returns may have an extended deadline of 15 May. Australian tax returns are managed via ATO myTax (the online filing system). UK Self Assessment returns cover the UK tax year (6 April to 5 April); the online filing deadline is 31 January following the tax year end. UK nationals who are non-UK-resident with UK-source income (rental, government service pension) must file a UK Self Assessment (SA105 property, SA106 foreign income supplements); Australian tax residents include worldwide income in their ATO return and claim foreign tax credits for UK tax paid under the DTC. Both countries share data under the OECD Common Reporting Standard (CRS); the ATO and HMRC exchange account data for residents of each country, enabling cross-checking of declared foreign income.

This article is for general information only and does not constitute tax, legal, financial or immigration advice. Rules and rates change; verify with the primary sources cited or consult a qualified adviser before acting.

FAQ

Which country has higher income tax: Australia or the UK?

It depends on income level and whether NI is included. On equivalent moderate incomes (approximately £50,000/AUD 95,000), the UK’s combined income tax and NI effective rate (approximately 30-32%) exceeds Australia’s income tax plus Medicare Levy (approximately 24%). On higher incomes (above the equivalent of £125,140/AUD 240,000), both countries’ top marginal rates are 45%; Australia’s Medicare Levy adds 2% on top. UK income tax thresholds are frozen to April 2031 per Autumn Budget 2025, increasing effective UK tax burdens over time through fiscal drag.

How does Australia’s CGT discount work compared to the UK?

Australia taxes capital gains as part of ordinary income but applies a 50% discount on assets held more than 12 months; the effective CGT rate for a 37% tax bracket Australian resident is therefore 18.5%. The UK taxes CGT at a flat 18% (basic rate) or 24% (higher/additional rate) for residential property and non-residential assets from October 2024. Australia’s 50% discount makes it more favourable than the UK for long-term investors; UK annual CGT exempt amount (£3,000 for 2025/26) provides a small threshold exemption.

What is the Superannuation Guarantee rate in 2025?

The Australian Superannuation Guarantee (SG) rate is 12% of ordinary time earnings from 1 July 2025, increased from 11.5% in 2024/25 per ATO published guidance (ato.gov.au). Employers must make SG contributions to a qualifying super fund within 28 days of the end of each quarter. Super in the accumulation phase is taxed at 15% on contributions (concessional) and 15% on investment earnings. Super accessed after age 60 by a resident retiree is generally tax-free. UK pension contributions attract income tax relief at the marginal rate; the Annual Allowance is £60,000 for 2025/26.

Do UK nationals in Australia pay UK tax on their income?

UK nationals who satisfy the SRT automatic overseas tests (fewer than 16 UK days per year if recently UK-resident) are non-UK-resident; they pay Australian income tax on their worldwide income (under the ATO resides test) but not UK income tax on Australian employment income. UK-source income (UK rental, government service pension) remains taxable in the UK. The UK-Australia DTC (1967, Protocol 2003) eliminates double taxation via a credit mechanism in both directions; Australian residents claim foreign tax credits on their ATO return for UK tax paid on UK-source income.

How do UK dividend tax rate changes from April 2026 affect Australian residents with UK shares?

UK dividend tax rates changed from 6 April 2026 under the Autumn Budget 2025: ordinary rate is now 10.75% (was 8.75%); upper rate 35.75% (was 33.75%). For a UK non-resident in Australia, UK-sourced dividends are typically taxed in Australia (as the country of residence) under the UK-Australia DTC; the UK withholds at a treaty-limited rate of 15% on dividends where the Australian resident holds less than 10% of the UK company. This UK withholding is credited against the Australian income tax on the same dividends via T2A foreign tax credit. The new UK dividend rates affect UK-resident shareholders; Australian residents pay Australian income tax on their net UK dividends with a foreign tax credit for UK withholding tax.

Does the UK-Australia DTC prevent double taxation?

Yes. The UK-Australia Double Taxation Convention (1967, Protocol 2003) eliminates most double taxation on income earned in one country by a resident of the other. Key provisions: employment income is taxable in the country of performance (Article 15); dividends are taxable in the country of residence with a withholding rate cap of 15% (Article 10); interest is taxable in the country of residence with a 10% source-state withholding cap (Article 11); government service pensions are taxable only in the source country (Article 17); private pensions are taxable in the country of residence (Article 17). The DTC tie-breaker (Article 4) resolves dual residency situations sequentially.

Sources

1. ATO -- Individual income tax rates 2025/26 (Stage 3 changes) (verified 26 April 2026)
2. HMRC -- UK income tax rates and personal allowance 2025/26 (verified 26 April 2026)
3. GOV.UK -- UK-Australia Double Taxation Convention (1967, Protocol 2003) (verified 26 April 2026)
4. GOV.UK -- Autumn Budget 2025 OOTLAR (threshold freeze and dividend rates) (verified 26 April 2026)
5. OECD -- Australia and UK income tax rate comparisons (verified 26 April 2026)