Matthew Braithwaite
- Partner
- Private Client
The UK Budget 2025: impact for international private clients
The Budget delivered by the UK government on 26 November 2025 includes announcements affecting internationally mobile UK-connected individuals and those with cross-border wealth, although not on the scale that had been anticipated. The Budget is perhaps more notable for what was not announced.
Despite speculation, the Budget did not introduce a capital gains tax (CGT) exit charge for individuals leaving the UK; nor were there new wealth taxes beyond the high-value council tax surcharge, two measures which were strongly rumoured in the weeks and months leading up to the Budget.
The new tax regime affecting non-UK domiciled individuals established by Finance Act 2025 with effect from 6 April 2025 (“non-dom tax regime”) remains, despite ongoing feedback from the industry that the reforms are driving global talent and investment from UK; however, in a possible acknowledgement of this trend, the Budget included some concessionary announcements for “non-doms”, as well as some minor technical amendments affecting the operation of the non-dom tax regime.
The key announcements specifically affecting international private clients are set out below, but these individuals may also be impacted by the measures that affect UK resident private clients. Further details are set out in our Budget-day briefing here and also our subsequent article on the Budget impact on homeowners, landlords or custodians of heritage estates.
- A high-value council tax surcharge (or “mansion tax”) – this will be introduced on owners of residential properties in England with a value of more than £2 million, from April 2028. This is in addition to any council tax second home premium which is levied by some local authorities on residences that are not a main residence.
- Higher income tax rates for income received from property, savings and dividends:
- a 2% increase to the dividend ordinary rate (currently 8.75%) and the dividend upper rate (currently 33.75%) from 6 April 2026, although the additional rate of 39.35% will remain unchanged;
- a new separate rate of income tax for rental profits and income distributions from REITs across all tax bands from 6 April 2027 at rates 2% higher than currently apply. The rate of tax on such property income will be 22% (basic rate), 42% (higher rate) and 47% (additional rate); and
- a 2% increase in the rates of income tax for savings income (such as bank account interest) across all bands from 6 April 2027, meaning the rates will be 22% (basic rate), 42% (higher rate) and 47% (additional rate).
- Inheritance tax relief for agricultural property (APR) and business property (BPR) – the reforms announced in Budget 2024 so as to cap 100% relief to qualifying assets valued at £1 million (as opposed to unlimited relief, as at present) will go ahead, but Budget 2025 included a concession to allow the £1 million allowance to be transferable between spouses and civil partners which was not previously the case.
Capping IHT trust charges for excluded property trusts
There was an unexpected announcement that will affect formerly “excluded property trusts” for IHT purposes that have a long-term resident (LTR) settlor and were brought into the UK IHT net as a result of the non-dom tax reforms from 6 April 2025. A £5 million cap on IHT relevant property charges will apply to such trusts if they held excluded property for IHT purposes on 30 October 2024. The cap will be £5 million per trust over a full ten-year cycle, so for shorter periods (such as between 6 April 2025 and the next ten-year anniversary), the cap will operate on a pro-rata basis, set at £125,000 per quarter. The measure is retrospective from 6 April 2025. In practice, this concession will only benefit very large trusts – those with assets exceeding approximately £83 million – and many settlors with structures of this size are likely to have already left the UK before the new rules came into force.
Technical amendments to residence-based tax regime
Minor corrective amendments to the non-dom tax regime have been announced to ensure the legislation operates as intended without changing underlying policy. These adjustments affect foreign income and gains (FIG) relief, overseas workday relief (OWR), and the temporary repatriation facility (TRF).
These changes will be legislated for in Finance Bill 2025/2026 and most will have retrospective effect from 6 April 2025, although there are some which will take effect from the date of announcement, the date of Royal Assent or 6 April 2026.
Tax offer for high-talent new arrivals
The government announced that it will seek views in due course on how to further develop its tax offer for “high-talent new arrivals” to “support internationally mobile individuals to establish themselves and their businesses in the UK”. It is unclear what these changes will be, but the announcement is an encouraging one.
Non-resident CGT and disposals of UK land
Reforms were announced to the non-resident CGT (NRCGT) rules that apply to disposals of UK land and property by non-UK resident persons. These include that, in relation to protected cell companies (PCCs), it is an individual PCC cell that is to be looked at for the purposes of the “property richness” and “substantial indirect interest” tests, rather than the PCC itself. The measure aims is said to remove uncertainty and prevent avoidance through the use of PCCs. The change will apply to disposals made by PCCs on or after 26 November 2025. Further administrative reforms will apply from 6 April 2026 and will be legislated in Finance Bill 2025/26.
IHT and enveloped agricultural property
The government will legislate with effect from 6 April 2026 to “look-through” non-UK companies or similar bodies holding UK agricultural land and buildings so that the agricultural property is treated as UK situs for IHT purposes. This follows the existing IHT treatment UK residential property held via indirectly non-UK companies. Those who are non-LTR for IHT purposes and hold UK agricultural property through a non-UK company should review the continued efficiency of the structure.
Non-LTR settlors and trust exit charges
An immediate change has been introduced affecting trusts where the settlor is non-LTR for IHT purposes. The change concerns the IHT exit charge when non-UK property held in a trust falls outside the scope of IHT because the settlor’s status changes from LTR to non-LTR.
The measure is designed to prevent trustees from moving assets into the UK before the settlor’s status changes, thereby keeping those assets within the scope of IHT, and then relocating them overseas after the settlor becomes non-LTR to avoid the exit charge at the point the settlor’s tax status changes. The legislation will be included in Finance Bill 2025/2026 and will take effect for trust exit charges from 26 November 2025.
Temporary non-residence rules and post-departure trade profits
The temporary non-residence (TNR) rules are being extended. These rules apply when an individual leaves the UK for a period of non-residence but returns within five consecutive tax years, at which point, the individual may become liable to income tax or CGT on certain income or gains that arose during that period.
There is currently no charge to tax under the TNR rules if a distribution or dividend is made by a close company from profits that accrue to the company after the connected individual left the UK (“post departure trade profits”). From 6 April 2026, all such distributions or dividends received by an individual will be chargeable to income tax if caught by the TNR rules. There will also be amendments to the legislation to allow relief for foreign tax paid in the country of residence at the time the dividend was paid.
Non-resident dividend tax credit abolition
From 6 April 2026, the notional basic-rate dividend tax credit of 8.75% to which some non-UK residents are entitled, will be abolished. This means the tax treatment of non-UK residents will be aligned with UK residents in this respect. The removal of the notional tax credit will also impact non-UK resident trusts with UK resident beneficiaries and UK dividend income. The measure will have effect for distributions received on and after 6 April 2026.
Residence of personal representatives
Draft legislation has been published to change the definition used for determining whether executors (or personal representatives – “PRs”) are UK resident for CGT purposes. PRs will only be UK resident if the deceased was UK tax resident at the date of death. Previously, the PRs could also be UK resident if the deceased was not UK tax resident at death but was an LTR. In effect, this change will benefit those estates where the deceased had left the UK but was still within the LTR “tail period” as those estates will now be non-UK resident for CGT purposes. This change applies retrospectively and has effect where the deceased person died on or after 6 April 2025.
Annual Tax on Enveloped Dwellings (ATED)
The ATED legislation will be relaxed to ensure that the relief available to non-natural persons owning residential property for qualifying commercial purposes can be claimed without having do so within the time limit which presently exists.
Offshore tax non-compliance
As has been the case in recent years, the Budget contained further measures designed to tackle offshore tax non-compliance. These include the following.
- Tax transparency on real estate – a policy paper: Tackling offshore tax non-compliance published on Budget day includes the announcement that the UK will continue to work with international partners to further extend the global tax transparency system and address remaining gaps including in relation to real estate holdings and transactions..
- Promoters of marketed tax avoidance – the government will introduce new powers in Finance Bill 2025/2026 to tackle promoters of marketed tax avoidance.
- Tax adviser facilitated non-compliance – from 1 April 2026, HMRC will be given enhanced powers to act against tax advisers suspected of deliberately facilitating non-compliance that contributes towards the tax gap.
How we can help
Our Private Client team advises internationally mobile individuals, family offices and trustees on structuring wealth across borders, mitigating exposure to UK taxes and ensuring compliance with complex regimes such as the non-dom rules. We work seamlessly with your other advisers to deliver integrated solutions – from reviewing existing structures to planning for future changes.
If you would like to discuss how these Budget measures may affect you or your family, please contact Matthew Braithwaite of another member of our International Private Client team.
This article is for general information purposes only and does not constitute legal advice or a comprehensive statement of the law. Specific legal advice should always be sought in relation to individual circumstances.
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