Moving to Denmark can feel like stepping into a new chapter of life. The culture, work–life balance, and social security system are attractive reasons many UK expats make the move. But alongside the positives comes the reality of paying taxes.
Denmark is well known for having one of the highest tax levels in the world, and if you are arriving from the UK, the system may feel overwhelming at first. This guide will break down the essentials so you know what to expect, how to plan, and how to avoid surprises.
The Basics of Danish Tax
In Denmark, almost everyone who lives or works in the country is subject to tax. The Danish Tax Authority is called SKAT, and they oversee everything from income tax to VAT.
If you stay in Denmark for more than six months, you are considered tax resident. This means your worldwide income is taxed in Denmark, not only the salary you earn locally. If you live in Denmark but work remotely for a UK employer, your income will still generally be taxed in Denmark, though the UK–Denmark double taxation agreement ensures you won’t pay twice.
Tax in Denmark is progressive. The more you earn, the higher the percentage you pay. But unlike the UK, where you file a tax return manually every year, the Danish system is heavily automated. Your employer usually reports your income directly to SKAT, and you get a pre-filled tax return.
Useful Tax Tools for UK Expats
Understanding how much tax you will actually pay can be tricky, especially when income is split between the UK and Denmark. One way to make the process easier is by using online calculators.
Tools such as iTaxCalc can help you estimate your UK tax position before comparing it with the Danish system. While it does not replace official guidance or professional advice, it gives you a quick overview and can help you plan ahead before filing.
Income Tax Rates
Danish income tax is split into several layers. These combine to form your total tax percentage.
- Municipal Tax: Around 24–27%, depending on which kommune (municipality) you live in.
- Health Contribution: Included in the municipal tax rate.
- Bottom Tax (Bundskat): 12.1% on all income above a small threshold.
- Top Tax (Topskat): 15% on income above approx. DKK 588,900 (before AM-bidrag). This is the closest thing to the UK’s higher-rate band.
- Labour Market Contribution (AM-bidrag): A flat 8% deducted before income tax is calculated.
When you add everything together, the effective tax rate for most workers is between 37% and 45%. The maximum marginal rate is about 52%, which is capped by law.
Personal Allowances and Deductions
Just like the UK has a personal allowance, Denmark offers deductions.
- Personal Allowance (Personfradrag): Every resident gets a tax-free allowance, approx. DKK 49,700 per year. For people under 18, it is lower.
- Work-Related Deductions: Commuting expenses, union fees, and unemployment insurance contributions can be deducted.
- Interest Deduction: Mortgage or loan interest is partially deductible.
Unlike the UK, charitable donations are only deductible above a certain amount and only to approved organizations.
Double Taxation and UK Expats
The UK and Denmark have a double taxation treaty. This ensures that income is not taxed twice. If you already pay tax in the UK, you may receive relief in Denmark, or vice versa.
For example, pensions from the UK are usually taxable only in Denmark if you live here, but government service pensions may still be taxed in the UK. This is an area where professional tax advice is important, as the rules are detailed.
If you own property in the UK and rent it out, the rental income will be taxable in Denmark as part of your worldwide income, but tax paid in the UK can be offset.
Social Security Contributions
In the UK, National Insurance is a major part of the system. In Denmark, contributions are included in your tax. Employers also contribute on top of your salary.
Expats benefit directly from this, as the contributions fund healthcare, education, and pensions. Once you are registered with the Danish Civil Registration System (CPR), you gain access to free healthcare through your yellow health card.
Filing Your Taxes
The Danish tax year runs from January 1 to December 31. Each March, SKAT issues your pre-filled tax return (årsopgørelse). You check the details, add any missing deductions (such as commuting costs), and approve it online.
If you owe additional tax, payment is due in the summer. If you have overpaid, the refund is transferred automatically to your bank account.
Unlike the UK, where self-assessment is more common, most employees in Denmark only need to review and approve their pre-filled return. Self-employed expats, however, must report income more actively.
Property and Capital Gains
If you buy a house or apartment in Denmark, you will pay property value tax (ejendomsværdiskat). This is 1% of the property’s value up to a certain threshold, and 3% above it.
If you sell property in Denmark, capital gains may be tax-free if the property was your main residence. For investments, such as shares, Denmark taxes capital gains and dividends at rates between 27% and 42%, depending on the amount.
If you still hold UK investments, these must be reported in Denmark. ISAs, which are tax-free in the UK, do not have special tax status in Denmark.
Everyday Taxes – VAT and Duties
Apart from income tax, expats quickly notice VAT (moms). The rate is 25% on most goods and services. Unlike the UK, there are almost no reduced rates – groceries, books, and restaurant meals all carry the full 25%.
Denmark also has high duties on alcohol, tobacco, and cars. This means vehicles are significantly more expensive than in the UK, due to registration tax on top of VAT.
Tips for UK Expats
- Register Quickly: Apply for a CPR number and tax card as soon as you arrive. Without a tax card, your employer withholds 55% automatically.
- Check Your Deductions: Make sure commuting and other deductions are included.
- Understand Your Residency: If you keep ties to the UK (like a house), residency can be complex. Seek advice if in doubt.
- Use the Double Taxation Agreement: This can save you from paying twice.
- Consider Professional Help: The Danish system is automated, but cross-border issues often require expert advice.
Conclusion
For UK expats, the Danish tax system may feel stricter and more expensive compared to back home. But it is also highly efficient and provides access to a generous welfare state. With the right preparation, you can avoid surprises and take full advantage of the benefits that come with being a taxpayer in Denmark.
Think of it as part of the package: you pay more, but in return you get high-quality healthcare, education, and social security. For many expats, the trade-off is worth it, especially when combined with Denmark’s strong work–life balance and safe, family-friendly environment.