UK tax for Australians in London: PAYE, tax codes and the treaty

Most Australians in London never file a UK tax return. Your employer does the work through PAYE. Your job is to make sure the tax code is right and to know when Australian income changes the picture.

The short version

• The UK tax year runs from 6 April to 5 April. The 2026–27 personal allowance is £12,570, then 20%, 40% and 45% bands [1].
• National Insurance comes off your pay too: 8% on most earnings, 2% above the upper limit [2].
• A new starter with no P45 often lands on an emergency tax code like 1257L M1. HMRC usually fixes it within 35 days, and you get overpaid tax back [3].
• You need Self Assessment if you have untaxed income, such as rent from a flat in Brisbane or a claim under the new four-year foreign income regime [5][6].
• The Australia–UK tax treaty, in force since December 2003, decides which country taxes what, so the same income isn't fully taxed twice [8].

How PAYE works on a London payslip

PAYE (Pay As You Earn) is the UK version of PAYG withholding. Your employer works out income tax and National Insurance each pay day and sends it to HMRC. Unlike in Australia, there's no annual tax return for most employees. If PAYE is right, you're done.

The key is your tax code. The standard code for 2026–27 is 1257L: the number is your £12,570 allowance with the last digit dropped. The code tells payroll how much to pay you tax-free before the bands kick in.

Income tax bands for 2026–27 (England)

Source: GOV.UK [1]. Scotland has its own rates, but London follows the table above.

There's a sting at the top. Once your adjusted net income passes £100,000, you lose £1 of personal allowance for every £2 over. By £125,140 it's gone [1]. That creates an effective marginal rate well above 40% in that band. Salary sacrifice into a workplace pension is the usual way people manage it.

National Insurance

National Insurance (NI) is separate from income tax and funds the State Pension and some benefits. For 2026–27, employees pay 8% on earnings between £1,048 and £4,189 a month, and 2% on anything above that [2]. There's no Australian equivalent on your payslip. Medicare levy is the closest cousin, but NI also builds your UK State Pension record.

You need a National Insurance number for your NI contributions to be recorded properly. You can start work before it arrives, but chase it. See our guide on UK eVisa and share codes.

Emergency tax codes: why your first pay looks wrong

New arrivals almost never have a P45, the form you get from a previous UK employer. Without it, payroll often puts you on an emergency tax code. It shows up as 1257L with W1 (weekly pay), M1 (monthly pay) or X, or as NONCUM on some payroll systems [3].

On an emergency code, each pay period is taxed as if it were the only one. If you arrive mid-year, you don't get the benefit of the allowance from the months you weren't working. You overpay.

Here's how to sort it out:

1. Fill in the starter checklist your employer gives you. It tells payroll whether this is your first job since 6 April.
2. Get the HMRC app or a Personal Tax Account on GOV.UK. You can see your tax code and employer there.
3. Wait up to 35 days. HMRC usually updates your code within that window once it has your details [3].
4. Check your next payslip. The W1 or M1 should be gone and you may see a refund through payroll.
5. Still wrong after 35 days? Update your details through HMRC's online service or call them [3].
6. Missed out at year end? HMRC sends a P800 tax calculation between June and March of the following tax year, and you can claim any overpayment back [10].

If you leave the UK partway through a year, you can claim a refund of overpaid PAYE using form P85, through your Personal Tax Account or the HMRC app [10].

When you need a Self Assessment tax return

Self Assessment is the UK's tax return. Most PAYE employees don't need one. Australians in London often do, because of income back home.

You'll probably need to file if you:

• earn rent from a property in Australia
• have Australian interest, dividends or capital gains that you need to declare
• want to claim the four-year foreign income and gains regime (below)
• want split-year treatment for the year you arrived
• have self-employed or freelance income in the UK

GOV.UK has an online checker to confirm it [7]. If you do need a return, register by 5 October after the tax year ends. For 2025–26, that was 5 October 2026 [7]. The online return and any tax owed are due by 31 January 2027. Paper returns were due by 31 October 2026 [6]. Late returns get a penalty.

Residence, split years and the four-year regime

Are you UK resident?

The UK uses the statutory residence test, based on days in the UK during the tax year. You're automatically UK resident if you spend 183 days or more here, or if your only home is in the UK for long enough, or if you work full-time here for a year [4]. Most Australians who move to London to work are UK resident from their first full tax year.

Split-year treatment

If you arrive partway through a tax year, the year can be split into a non-resident part and a resident part. You then only pay UK tax on foreign income for the resident part [4]. Arrive in September and your Australian income from April to August generally stays out of the UK net. You claim it on your Self Assessment return, and HMRC has detailed rules on which "case" applies.

The four-year foreign income and gains regime

From 6 April 2025 the UK scrapped the old non-dom rules and brought in a four-year foreign income and gains (FIG) regime [5]. It's built for people like most Australians arriving in London.

You qualify if you're in your first four years of UK residence after at least 10 years of not being UK resident [5]. During those years you can choose not to pay UK tax on eligible foreign income and gains, including:

• profits from an overseas property, such as rent from your flat in Melbourne
• dividends from non-UK companies
• interest on foreign bank accounts
• foreign capital gains

There are trade-offs. Foreign employment income isn't covered. You claim it on Self Assessment, so you must file. And claiming means losing your tax-free allowances for income tax and capital gains tax [5]. For someone with small Australian income, giving up the £12,570 allowance can cost more than it saves. Run the numbers, or get advice, before ticking the box.

The Australia–UK tax treaty and the ATO

The Australia–UK double taxation convention was signed on 21 August 2003 and entered into force on 17 December 2003 [8]. In plain terms:

• Tie-breaker: if both countries treat you as resident, the treaty looks first at where you have a permanent home available, then where your personal and economic ties are closer [8].
• Dividends: the source country can tax at most 15% in most cases [8].
• Interest: the source country can tax at most 10% in most cases [8].
• Pensions: pensions and annuities are generally taxable only where you live [8].

Where both countries tax the same income, your country of residence generally gives a credit for tax paid in the other.

The Australian side

Holding a UK visa doesn't decide your Australian tax status. The ATO applies its own tests, starting with the resides test, which looks at your ties, intentions and where your assets are [9]. Many people moving to London on a long-term basis become foreign residents for Australian tax. Others keep enough ties to stay resident.

Once you're a foreign resident, Australian interest, dividends and royalties are generally taxed by withholding as a final tax, and you don't report foreign income to the ATO [9]. Tell your Australian bank about your new status so the right withholding applies. In the year you leave, you can claim a pro-rata tax-free threshold for the months you were resident [9].

If you're unsure which side of the line you're on, read our guide on Australian tax residency after moving. For tips from people who've been through their first London tax year, join Cooee UK, our Facebook group for Australians in the UK.

Sources

1. Income Tax rates and Personal Allowances – GOV.UK
2. National Insurance: how much you pay – GOV.UK
3. Emergency tax codes – GOV.UK
4. Tax on foreign income: UK residence and tax – GOV.UK
5. Check if you can claim the 4-year foreign income and gains regime – GOV.UK
6. Self Assessment tax returns: deadlines – GOV.UK
7. Register for Self Assessment – GOV.UK
8. 2003 Australia-UK Double Taxation Convention – GOV.UK
9. Your tax residency – Australian Taxation Office
10. Tax overpayments and underpayments – GOV.UK

Keep reading

• Opening a UK bank account in London: beating the address catch-22
• Finding work in London: UK CVs, right-to-work checks and notice periods
• Australian tax residency after you move overseas
• HECS-HELP debt when you live overseas