James kept Elizabeth's Privy Council, a group of special advisors to the king, adding his own long-time supporters. James' government was closely managed by the Earl of Salisbury, the Lord Chancellor, and the Lord Treasurer. James focused on foreign policy, signing a peace treaty with Spain. But James' first true test came not from foreign enemies, but domestic ones. Catholics had faced persecution in England (recall that Henry VIII had established the Anglican Church under the Act of Supremacy), and while James' views toward Catholics was fairly moderate, he did not move to end the persecution of Catholics. When he gave a speech to Parliament desiring peace by "profession of the true religion," some Catholics took it as a sign that the king would prove to be no friend of Catholics. In 1605, a group of Catholic dissidents led by Guy Fawkes planned to blow up Parliament, where King James would be holding the state opening. What became known as the Gunpowder Plot was foiled, and Parliament passed new anti-Catholic legislation. 

For a while, James attempted to enforce religious conformity, but his policies toward Catholics tempered and he continued employing Catholics in high offices. To assuage Puritan demands, he also commissioned the King James Version of the Bible in 1611 to resolve discrepancies between different versions of the Bible. 

As his reign progressed, King James faced increasing financial difficulties and disagreements with Parliament. When Parliament refused to agree to a plan to pay off James' debts (proposed by Lord Salisbury), James dissolved Parliament and essentially ruled without Parliament until 1621. Instead, he hired officials to help run his government and sold titles in order to raise revenue. It was also under King James that England began its colonization of North America, with the Virgnia Company founding Jamestown Colony in 1607. By 1621, it was developing into a profitable colony (thanks largely to the planting of tobacco, with James hated, calling it "harmful to the brain and dangerous to the lungs"). But James was at times accused of neglecting the business of government for leisure pastimes, such as hunting. While James himself remained a fairly popular monarch, many resented his court officials and Privy Council.

The conflict with Parliament that started under James I continued under his son, Charles I.  Like his father, Charles believed in the divine right of kings, and religious differences also added to the hostility between Charles I and Parliament. Charles’s attempts to impose changes in the Anglican Church angered Puritans who felt he was reimposing Catholicism. When Charles needed money to fight a rebellion in Scotland, Parliament refused, so Charles dissolved Parliament, only to have to later call them back into session as the war in Scotland worsened. Continued conflict between Charles and Parliament ultimately led to the English Civil War, after which the new monarchs, William and Mary, had to accept the English Bill of Rights that specified the rights of Parliament and laid the foundation for a constitutional monarchy.