Sarcasm is commonly used in everyday language; however, little is currently known about cultural and individual differences in sarcasm interpretation and use, particularly across Western and Eastern cultures. To address these gaps in the literature, the present study investigated individual differences in sarcasm interpretation and use in the UK and China. Participants first rated literal and sarcastic comments regarding degree of perceived sarcasm, aggression, amusement, and politeness. They then completed tasks which assessed their theory of mind (ToM) ability, perspective taking ability, and sarcasm use tendency. The results showed that UK participants were more sarcastic than Chinese participants. In terms of interpretation, UK participants rated sarcasm as being more amusing and polite than literal criticism, whereas the Chinese data showed that sarcasm was rated as being more amusing but also more aggressive than literal criticism. ToM ability and perspective taking ability positively predicted sarcasm perception in both cultural groups, while the effects of ToM on other rating dimensions varied across cultures. Sarcasm use tendency negatively predicted perception of sarcasm and aggression in UK participants, whereas the opposite was found for Chinese participants. The decomposition of individual difference effects showed that different facets of interpretation and socio-emotional impact of sarcasm are differentially associated with different cultural and individual differences factors. From this, we propose that both cultural and individual differences factors modulate sarcasm interpretation and use: Participants from different cultures and with different traits may view sarcasm differently, which, in turn, affects their interpretation and use of sarcastic language.