Andorra vs The UK: A Comparison of Tax Systems – Fully Expanded and Updated January 2025

Andorra and the United Kingdom offer contrasting tax systems. Andorra’s low-tax policies and economic stability make it a favored destination for expatriates and businesses. The UK, with its more complex tax regime and higher rates, offers extensive public benefits, including universal healthcare and social security. This updated blog compares the tax systems of Andorra and the UK, covering personal income tax, corporate tax, VAT, capital gains tax, and social security contributions. At Axior Global, our experts can help you navigate these systems and determine the best fit for your goals.  

Tax Overview: Andorra vs The UK

Tax Type	Andorra	United Kingdom
Corporate Tax	10%	19% to 25% (depending on profits)
Personal Income Tax	0% to 10%	20% to 45%
Capital Gains Tax	10% (general rate); property tax varies	10% to 28%
VAT	4.5%	20% (standard); Reduced: 5% – 0%
Wealth Tax	Not applicable	Not applicable
Inheritance Tax	Not applicable	40% above £325,000 threshold
Social Security	22% (6.5% employee, 15.5% employer)	12% to 14% (employee), 13.8% (employer)

1. Personal Income Tax

Andorra employs a simple, progressive income tax system capped at 10%. Here’s the breakdown for 2025:

• €0 – €24,000: 0%
• €24,001 – €40,000: 5%
• €40,001 and above: 10%

Savings income, including interest and dividends, is taxed separately under specific conditions.   The UK has a progressive income tax system with the following brackets for the 2024/2025 tax year:

• £0 – £12,570: 0% (Personal allowance)
• £12,571 – £50,270: 20% (Basic rate)
• £50,271 – £125,140: 40% (Higher rate)
• Over £125,140: 45% (Additional rate)

National Insurance contributions (NI) apply separately.  

2. Corporate Tax

Andorra’s corporate tax rate is 10%. Special regimes for R&D and international companies may reduce this rate further.   Corporate tax rates in the UK vary:

• 19% for profits under £50,000
• 25% for profits over £250,000
• Marginal relief for profits between £50,000 and £250,000

3. Value Added Tax (VAT)

Andorra’s VAT rate is 4.5%, with reduced rates for essentials like healthcare and education.   UK VAT rates:

• Standard: 20%
• Reduced: 5% (e.g., energy bills)
• Zero-rated: 0% (e.g., food, books)

4. Capital Gains Tax

Andorra:

• General rate: 10%
• Real estate sales: 15% if sold within 1 year; reducing progressively to 0% after 10 years
• Stock and investment sales: General rate 10%. Exemptions may apply depending on holding period and transaction type
• Short-term speculative investments: Surcharge of 5% may apply if sold within 2 years

United Kingdom:

Standard Assets:

• Basic-rate taxpayers: 10%
• Higher-rate taxpayers: 20%
• Residential Property:
• Basic-rate taxpayers: 18%
• Higher-rate taxpayers: 28%

5. Social Security Contributions

Andorra:

• Employees: 6.5%
• Employers: 15.5%
• Total: 22%

United Kingdom:

• Employees: 12% to 14%
• Employers: 13.8%

Conclusion

Andorra’s tax system is designed for simplicity and efficiency, with low rates and no wealth or inheritance taxes. The UK, on the other hand, provides a more robust welfare system funded by higher taxes, making it appealing to those seeking comprehensive public benefits. For expert guidance on structuring your finances efficiently in Andorra or the UK, contact Axior Global.