UK Tax Compared With Other Countries: 2026 Study

There is a lot of talk about people wanting to emigrate from the UK because of rising costs, and with almost a quarter of a million leaving last year, we looked into whether Brits really do have it worse than people in other countries.

When comparing tax systems, it is easy to focus on one headline figure; income tax.

However, we’ve discovered that it’s just as important to factor in several other taxes. Inheritance tax, dividend tax, and investment tax can all play major roles in determining how expensive a country is to live in – and dramatically alter the overall picture.

We’ve compared the tax position of four ‘earning personas’ (average people in different financial situations), across 13 developed economies, to examine how much tax they would face under each system.

There are some similarities across the personas: in each case, we have assumed they are 45 years old and are an only child. Those factors matter as some countries have tax bands that can change based on these factors.

The country with the highest tax burden ranks number one, with the country in 13th position having the lowest tax burden.

Key Findings

Key findings from the Wealth Competitive Index

For the average earner: the UK has the 3rd lowest burden of 13 countries
For a £99k earner: the UK has the 5th highest burden
For a business owner: the UK has the 4th highest burden
For an affluent individual (in the top 1% of earners): the UK has the 3rd-highest burden

UK tax burden for the average earner

To begin building a comparison, we analysed how the average person would be impacted. Our first persona is someone on the average UK annual wage of £39,039. They have no investment income, and pay a minimal amount into their pension. In this year of their life, we have imagined they were gifted an inheritance. In this case, a property worth £268,000 (the average UK house price).

A person from the UK benefits quite well from this scenario as the overall tax burden is substantially below international average.

Overall, the UK has the third-lowest overall tax burden at just £7,083.32, all of which comes from income tax. That means their take-home pay is £30,315.68, making the UK one of only five countries where the average person will earn over £30,000 a year after tax.

No inheritance tax is payable on the property as, in this situation, it falls below the standard threshold of £325,000.

The only countries paying less tax than the UK are the US and Ireland. In comparison, France has the highest tax burden of £45,368.01, due to stricter inheritance tax laws. An individual in France would pay £10,599.60 in income tax. But the inherited property creates a further £34,768.41 bill, accounting for over three-quarters of the overall tax burden in this case.

Residents of the Netherlands and Japan rank second and third highest due to high inheritance tax rates, while Spain, despite having the fifth highest income tax at this level, only ranks seventh overall. This is due to an inheritance tax bill of just £255.12 bringing the overall tax burden down to £10,154.24.

UK tax burden for someone earning £99,000

As the £100,000 tax trap can complicate things in the UK, we analysed someone just below that threshold. So in this scenario, our persona earns £99,000 annually. They put £9,900 of their wage into a pension (10 per cent), invest £14,850 per year into investments, and again, they receive an inheritance, in this case an estate worth £712,000, which is split between a £542,000 house (average in London), £150,000 from ISAs and investments, and further assets valued at £20,000.

It’s a steep jump for anyone from the UK, who will pay £111,862.60 in taxes – much more than the average earner or business owner.

Due to this individual’s investments being sheltered in the tax-free wrapper of an ISA, their post-tax income from wages and investments is actually the third highest of all the nations at £62,642, with £27,062.60 paid in tax.

The UK is one of just seven countries charging an inheritance tax bill on the £712,000, at a total of £84,800.

This means inheritance tax accounts for around 76 per cent of the individual’s total tax bill in this particular year of their life.

France, Japan, the Netherlands, and Ireland are the only countries with a higher tax burden, each demanding an inheritance tax payment above £120,000.

Italy has the highest tax on income and investments at this amount, but once inheritance tax is factored in, it falls to the seventh-highest overall amount.

Once again, the USA has the lowest tax burden at £20,889.51 – over £90,000 less than the UK.

How UK taxes affect business owners

We also analysed a business owner or company director. For this, we used someone with an income of £60,000, who is paid a dividend of £100,000, contributes £20,000 to their pension, maximises their £20,000 ISA allowance, and inherits a £1,200,000 estate from a parent. This figure would put them in the top 10 per cent of households in the UK. In this scenario, the home was worth £950,000, £200,000 has been gifted from ISAs and investments, and £50,000 has come from other assets.

These results put the UK firmly towards the top of the high tax burden international rankings. Under the UK’s model, a business owner here would pay a total tax bill of £324,982.81.

Only Japan, France, and Ireland generate a higher tax bill, which places the UK fourth.

The UK figure is more than £307,000 higher than the US figure, while the UK comes in almost £288,000 above Australia and more than £303,000 above New Zealand.

In stark contrast, people in six of the countries analysed would face a tax burden of less than £50,000, and Italians would also only pay around £60,000.

When broken down, the Brit would take home £31,303.40 from their wage, £63,713.79 from their dividend, and the full £815 earned from investments, as it is held in an ISA.

However, our stricter inheritance tax laws mean £180,000 from the estate will go to the government, leaving our business owners person with £920,000.

How the UK taxes high earners and wealthy individuals

Our final persona falls into the top 1 per cent of earners in the UK. This is due to their income of £207,000 annually, with £10,000 of pension contributions. That amount has been limited due to a tapered annual allowance that applies at this income level. They also receive an annual investment income of £50,000, and a dividend income of £150,000. In addition, in this particular year, they receive a substantial inheritance of £3.1 million, consisting of a £2.5 million property, £500,000 from ISAs and investments, and £100,000 in other assets.

The tax implications are significantly higher at this level, causing the UK to move up the table even further. A UK earner in this financial bracket has the third-highest overall tax burden in the comparison, at £1,250,381.75. Japan and France are the only countries with higher tax bills at this level.

What’s most striking is inheritance tax, which accounts for almost 90 per cent of the UK earner’s overall charges; a total of £1.11 million due on an estate of this value.

When broken down further, £58,828.25 is due in dividend tax, meaning the UK has the highest dividend tax charge of any country analysed that imposes a specific dividend tax (separate from income tax).

Of the £2,037 earned in interest from investments, £1,222 comes from the £30,000 not stored in an ISA, leaving the person with a tax bill of £549.90 on that gain.

Income tax accounts for just £81,003.60 of the total, which is lower than the figure from any other European country in our research.

When looking at the overall tax burden, seven nations have a tax bill lower than a quarter of a million pounds. Contrast that with the £1.25m that the UK earner owes, and it becomes clear just how high the UK tax burden is for earners in this income bracket.

Which countries have the lowest tax burden?

The US ranks as the most generous country in every persona scenario, although it does depend on where in the US a person lives. Houston, Texas, which is where our research presumes the beneficiary lives, leaves a lot more money in the pockets of its residents than other places such as California or New York, when factoring in federal, state, and local taxes.

Why inheritance tax changes the UK’s position

This international comparison highlights how much inheritance tax can change a country’s overall position. For UK earners, it’s particularly significant.

The bottom line is, if you are anticipating a large inheritance, then expect to pay significant amounts to the state in inheritance tax.

Whereas those inheriting the exact same estate in some other countries could face a very different tax outcome. Australia, Canada, New Zealand, Portugal, and the United States don’t levy any charges on an inheritance, while people in Spain and Italy pay bills that total less than 5 per cent of the UK charge in most situations.

Our research shows that a modest tax in one area doesn’t necessarily mean you will benefit elsewhere – it can be a case of swings and roundabouts. However, those in the UK who don’t inherit much will see themselves burdened far less by tax than they would otherwise be in many other countries.

If you are thinking of leaving the UK for financial reasons, it’s important to take into account all types of tax, not just income tax, as it could have a significant impact on your overall wealth.

Methodology and sources

Our analysis modelled identical personas across 13 countries, comprising all the G7 countries and the top 10 countries Brits are currently choosing to emigrate to according to ONS data. We used the same assumptions for income, investments, dividends, property ownership and inheritance across all countries analysed.

Four personas with different levels of wealth were included in the analysis for fair results to show how income and tax levels change at different earnings points. All personas assume a person who is 45 years old and is an only child (therefore not sharing inheritance).

Country-specific tax rules were then applied to each scenario. For example, in Canada, any interest gained from investments and money from dividends is included in income taxes. All final figures were converted into pounds sterling to enable direct comparison.

Persona one assumed the average annual UK income of £39,039, pension contributions of £1,640 per year, no dividends or investments, and inherited a home worth the average property price sold in May of £268,000.

Persona two allocated someone just below the £100k tax trap with an annual income of £99,000, pension contributions of £9,900 per year, investments of £14,850 per year, no dividends. In this scenario they inherited a home worth the average property price sold in London in May of £542,000, as well as £150,000 in cash and £20,000 in other assets.

Persona three assumed a business owner or company director, with an annual income of £60,000, pension contributions worth £20,000 per year, investments of £20,000 per year, a dividend of £100,000 a year, and an inherited home worth £950,000, as well as £200,000 in cash and £50,000 in other assets.

Persona four was a very high earner, with an income of £207,000 annually, pension contributions of £10,000 per year due to a tapered annual allowance at this level of income, investments of £50,000 per year, a dividend of £150,000 a year, and inherited a home worth £2,500,000, as well as £500,000 in cash and £100,000 in other assets.

The exchange rates for each country are as follows (rounded to two decimal places):
EU Countries: £1 to €1.16
Australia: £1 to $1.90
Canada: £1 to $1.88
Japan: £1 to ¥215.08
New Zealand: £1 to $2.30
USA: £1 to $1.34

The number of Brits emigrating: Office for National Statistics.