UK Budget 2025: What It Means for UK Nationals Living Abroad

Even if you live outside the UK, the latest Budget still affects many British expats. Whether you hold UK pensions, rental property, investments, receive UK relevant earnings or are considering a future return, these are the updates most relevant to you.

1. Income Tax & National Insurance

Several major thresholds remain frozen and a number of rates are planned to increase in the coming years.

Key points for expats:

• Income tax thresholds frozen until 2030/31
  Fiscal drag continues, meaning more of your UK income may be taxed at higher rates over time.
• National Insurance thresholds also frozen until 2030/31
• Dividend tax increases (from April 2026):
• Savings income tax rises (from April 2027):
• New separate property income tax rates (from April 2027)
• Order of deductions changing (from April 2027):
  Property, savings, and dividend income will only receive certain reliefs after all other income.
• Dividend tax credit for non-UK residents ends April 2026
• Homeworking expense deductions removed from April 2026

Why this matters to expats:

If you receive UK income, dividends from UK companies or interest-bearing savings, your UK tax bill could increase from 2026 onward. This may affect repatriation planning, pension withdrawal strategies and investment structures.

2. Capital Gains Tax (CGT)

• Relief on disposals to Employee Ownership Trusts reduces to 50% from Nov 2025
• Non-resident CGT rules will be updated from April 2026

Impact:

Anyone intending to sell UK property or other chargeable UK assets from abroad may wish to review timing and structuring carefully.

3. UK Pensions

Significant updates affect expats who contribute, hold UK pensions or rely on their National Insurance record.

Key points:

• Salary sacrifice above £2,000 per year treated as normal contributions from April 2029 (subject to full NI for employer and employee)
• Voluntary Class 2 NI will no longer be available from overseas from April 2026
• Class 3 NI contributions will require 10 years’ residency or contributions to qualify (from April 2026)

Impact:

Completing your NI record will become more restrictive from 2026. Expats aiming to secure a full UK State Pension may benefit from reviewing their contribution strategy due to these changes.

4. Simple Assessment for Pensioners

From the 2027/28 tax year, simple assessment will apply to pensioners whose only income is the State Pension.

5. High-Value Property Council Tax Charge

Starting April 2028:

• Properties valued over £2m will face an additional annual charge
• Properties valued at £5m+ will face a charge of £7,500 per year

Impact:

Non-resident landlords or homeowners retaining high-value UK property could consider reviewing long-term ownership costs.

6. Individual Savings Account (ISAs), Venture Capital Trust (VCTs) & Enterprise Investment Scheme (EIS) Updates

• ISA allowance remains £20,000 from 2027
• Cash ISA limit becomes £12,000, except for over-65s who may use the full £20,000
• A 2026 consultation will consider a new simplified ISA
• From April 2026:
  • VCT & EIS limits increase
  • VCT income tax relief reduces from 30% to 20%

Impact:

Most ISA benefits don’t apply to expats due to local tax laws, but returning UK nationals may need to be aware of future changes.

7. Inheritance Tax (IHT)

• Nil-rate band freeze extended to April 2031
• £1m Agricultural Property Relief (APR) & Business Property Relief (BPR) allowance becomes transferable between spouses from April 2026
• Combined APR/BPR allowance frozen until 2031
• Infected blood scheme compensation exempt from IHT (immediate)
• From April 2027: Pension providers may hold back half of taxable benefits for up to 15 months to settle any IHT due. Personal Representatives will be protected from liability if additional pensions come to light after HMRC clearance
• UK agricultural property held through non-UK entities treated as UK-situated from April 2026
• Charity relief restricted to UK charities only from April 2026
• £5m cap on relevant property trust charges (for certain trusts created before 30 Oct 2024)

Impact:

Most expats remain subject to UK IHT due to long term UK residency rules and owning UK situs assets. These updates may affect estate structures, offshore entities, pension death benefits and cross-border legacies.

8. Reporting & Compliance

• UK cryptoasset service providers will need to report information on UK-tax-resident clients
  • First reports due in 2027

Impact:

Anyone using UK-based crypto platforms should expect increased transparency and reporting obligations.

9. Temporary Non-Residence (TNR) Rules (Important for Expats!)

One area of UK taxation that can catch expats by surprise is TNR. Although not headline news in the Budget, HMRC has recently refreshed its technical guidance and with increasing international data-sharing, enforcement of these rules continues to tighten. With Budget-related UK tax rises coming into effect from 2026 onward, the timing of a UK return becomes even more significant.

These rules apply when someone leaves the UK, becomes non-resident for a period and later returns.

Why this matters

If you return to the UK within five tax years, certain gains and income realised while abroad can become retroactively taxable in the UK, even if they were taxed elsewhere, or even if the country you lived in had 0% tax.

This includes:

• Gains on assets sold while abroad
• Some pension withdrawals
• Certain business profits
• Some distributions from offshore bonds or investment structures

The intention is to prevent people from leaving the UK briefly to realise gains tax-free, but it affects many genuine expats unintentionally.

What’s changing?

Combined with other Budget changes, especially rising UK tax rates, these rules now make timing your return to the UK more important than ever.

What this means for expats

If you are planning to move back to the UK:

• The timing of returning could determine whether offshore gains or pension withdrawals become UK-taxable
• Financial steps taken abroad may unexpectedly fall back into the UK tax net
• Coordinating repatriation planning with a cross-border adviser may be helpful

For some clients, delaying or accelerating a return by a few months can have a massive impact on their tax liability.

What Could UK Nationals Abroad Do Now?

Review your UK income sources
Rising tax rates from 2026 may make restructuring beneficial.

Check your National Insurance strategy
Class 2 ending + stricter Class 3 rules, could make early action important for some people.

Reassess UK property ownership
Higher ongoing costs and updated CGT rules could affect long-term plans.

Consider cross-border estate planning
IHT freezes and new relief rules, coordinated planning may be beneficial.

Stay informed before returning to the UK
Future tax changes may influence the timing of repatriation.

Final Thought

You may live abroad but UK tax policy still follows you.
A well-structured cross-border plan can help ensure that these Budget changes don’t catch you off guard or add unnecessary tax burdens.