UK
Ireland
Autumn Budget 2025: Limited tax changes specific to international individuals – for now
Following significant tax changes in the Autumn 2024 Budget, including the abolition of the non-UK domiciled tax regime, it was unsurprising that this year’s Budget contained little that will specifically impact the tax treatment for international individuals.
The story so far
In her October 2024 Budget, the Chancellor effectively abolished the non-UK domicile tax regime, principally by removing the remittance basis regime and replacing it with a new residence based foreign income and gains (FIG) regime. Under these new rules, individuals arriving in the UK after a non-UK resident period of at least ten tax years will not be taxed on their FIG for their first four years of UK residence after 6 April 2025.
In addition, the inheritance tax (IHT) benefits previously enjoyed by non-UK domiciled individuals have been replaced by a new long-term residence rule. Once an individual has been UK resident for at least ten out of the previous 20 tax years, they become a long-term resident and subject to IHT on their worldwide estate. Even after leaving the UK, a long-term resident remains in the scope of worldwide IHT for a period of between three and ten tax years, depending on their prior UK residence period.
A set of transitional provisions was introduced from 6 April 2025, including the ability to remit certain amounts of foreign income and gains with a reduced tax rate, provided a designation over the income or gains is made before 6 April 2028, and the ability for some taxpayers to rebase some overseas assets held since 2017 for capital gains tax purposes.
Further details of the changes that were announced at last year’s Budget can be found here: Non-dom taxation changes 2025
Pre-Budget speculation – an exit tax?
Given the extent to which the UK tax regime was overhauled for international taxpayers last year, we were not expecting further changes to target this group.
That said, there was considerable media speculation about a potential exit tax – a charge on taxpayers when they cease to be UK resident. These rumours were fuelled by growing evidence that wealthy individuals, who previously benefitted from non-UK domiciled status, might be planning to leave the UK.
Fortunately, the Chancellor has decided not to introduce an exit tax at this stage. We welcome this decision, not least because it is perceived to discourage inward investment into the UK, but also because it would be difficult to administer and, potentially, challenging to enforce.
What further measures have been announced?
The Chancellor has announced several smaller changes that may impact some internationally mobile individuals.
- An IHT cap for formerly “excluded property” trusts settled prior to 30 October 2024
Before 6 April 2025, trusts established by non-UK domiciled settlors could benefit from IHT protection, provided they held only non-UK assets. From 6 April 2025, this protection was removed, and such trusts are now subject to IHT if the settlor is long-term UK resident at the time of an IHT event.
A new £5 million cap on IHT charges has now been announced for formerly excluded property trusts settled before 30 October 2024. This change applies retrospectively from 6 April 2025 and covers all IHT events occurring on or after that date. The cap applies per charge rather than on a lifetime basis, meaning only very large trusts – those with net assets of around £84 million or more – are likely to benefit.
- Anti-avoidance measures and holdings of UK agricultural land and buildings through offshore structures
New legislation now treats UK agricultural land and buildings held through a non-UK company as UK-situated for IHT purposes. This brings their treatment in line with the existing rules for UK residential property held in similar structures.
In addition, a charge will apply if, after the settlor ceases to be a long-term UK resident, the situs of trust assets changes from UK to non-UK. This measure prevents avoidance of an exit charge that would otherwise arise on non-UK situs property by moving assets into the UK before ceasing long-term residence and then transferring them overseas.
- Close company dividends paid out of post-departure trading profits
Under “temporary non-UK residence” rules, dividends received from a close company during a period of non-UK residence lasting five years or fewer may be taxed upon resuming UK residence. Dividends paid out of post-departure trade profits of close companies are currently exempt from these rules. From 6 April 2026, this exemption will be removed, and all dividends received from close companies during a period of temporary non-UK residence will be subject to UK tax in the tax year of return to the UK
- Tax credits on UK dividends
A deemed tax credit on UK dividends previously enjoyed by non-UK residents will be removed from 6 April 2026, bringing the treatment of non-UK resident individuals in line with that of UK residents.
- State pensions for non-UK resident individuals
To restrict the ability of individuals with minimal UK ties to build state pension entitlements, the government will remove the opportunity for non-UK resident individuals to make voluntary Class 2 National Insurance Contributions. In addition, the minimum UK residency period required to make contributions will increase from three years to ten years.
- Non-resident capital gains tax and protected cell companies
The definition of a “property-rich entity”, broadly being a company that derives more than 75% of asset value from UK land or property, will be amended for protected cell companies (PCCs) so that each individual cell of the PCC needs to be considered for the purpose of the test rather than the entire PCC,
Where do we go from here?
On the one hand, it is reassuring that the government has avoided further major changes targeting international taxpayers in this Budget. Given the significant reforms to their tax treatment in recent years, a period of stability is welcome. Most announcements focus on refining and amending existing rules rather than introducing new ones.
That said, some affected taxpayers may be disappointed that the government has not taken more decisive steps to curb capital flight. There also remain strong calls for a modern investor visa to complement the FIG regime and enhance the UK’s attractiveness to inward investment.
Please do get in touch with your usual S&W team or one of the contacts listed if you would like to discuss these changes in more detail.
Detailed analysis
Offshore taxation and non-UK resident individuals
Small changes have been announced to existing legislation regarding excluded property trusts, dividends paid to temporary non-UK residents and tax credits on dividends received by non-UK residents.
Changes to widen the scope of UK capital gains tax and inheritance tax in respect of some non-UK companies and structures holding UK property and agricultural property have also been announced.
Summary
The government has announced a cap of £5 million on inheritance tax (IHT) charges for formerly excluded property trusts settled prior to 30 October 2024 and now subject to the relevant property regime. This change has been introduced retrospectively from 6 April 2025 and applies to all inheritance tax events from this date.
Immediate changes to anti-avoidance provisions to bring more offshore structures into the scope of IHT and prevent individuals from changing the nature of holdings to limit exposure to UK IHT have also been announced. From 6 April 2026, further provisions will be introduced, aligning the treatment of non-UK structures holding UK agricultural property with those that hold UK residential property.
In addition, there will be alterations to some rules affecting non-UK resident individuals, from 6 April 2026:
- The exemption for dividends paid out of post-departure trade profits of close companies will be removed from the temporary non-UK residence rules. From this date, all dividends received from close companies during a period of temporary non-UK residence will be subject to UK tax
- The deemed tax credit on UK dividends received by non-UK residents will be removed, bringing the treatment of non-UK resident individuals in line with that of UK residents
- Non-UK residents will no longer be able to make voluntary class 2 national insurance contributions, which could impact their ability to claim the UK state pension. Class 3 national insurance contributions can still be made if the individual lived in the UK for 10 years in a row and paid at least 10 years of national insurance contributions while in the UK. This change to class 2 will coincide with a wider review of voluntary national insurance contributions expected in the new year
- Minor changes to capital gains tax were also announced to bring more protected cell companies holding UK residential property into the scope of UK CGT
Our comment
The Autumn Budget 2025 has been relatively quiet on offshore taxation announcements. Whereas the Autumn Budget 2024 brought in sweeping legislative changes, this Budget seems far more focused on smaller amendments to existing legislation. It is unlikely that these changes will have as significant an impact or create as much excitement as last year’s. Rumours about the introduction of an exit tax, however, appear to have been misleading, and there may be some breathing a sigh of relief.
While the £5 million inheritance tax cap may be seen as a way to reduce the impact of the April 2025 changes on offshore trust structures, ultimately this is only likely to affect the largest structures with a value of more than approximately £84 million. Although this may be a welcome change for those with wealth of this level in such structures, it is likely to be seen as too little too late for those with offshore trust structures who either restructured them or chose to leave the UK as a result of the April 2025 changes.
Changes affecting non-UK residents are unlikely to have a significant tax impact, although preventing non-UK residents from contributing and potentially claiming the UK state pension may be popular. The abolition of the non-UK resident dividend tax credit removes an anomaly that remained in the system after previous dividend tax reforms.
For more Autumn Budget 2025 analysis
