UK Autumn Budget 2025: What It Means for British Expats, Global Families and UK-Connected Investors

By Will Price

The UK Autumn Budget, delivered by Chancellor Rachel Reeves on 26 November 2025, marked a shift in the taxation of wealth, savings and long-term assets. Although the most significant reforms to the non-dom regime, the Foreign Income and Gains (FIG) rules and the Temporary Repatriation Facility (TRF) were implemented earlier this year, this Budget introduced important policy changes that will materially affect many British expats and UK-connected families.

It is important to recognise that Budget Day provides only the high-level political announcements and headline measures. Over the coming days and weeks, HM Treasury and HMRC will release the detailed technical papers, draft legislation and operational guidance that determine exactly how these measures will function. Our analysis will continue to evolve as those documents are published.

Even at this early stage, however, several themes are already clear.

A shift away from cash savings and towards investment risk

One of the most far-reaching changes is the restructuring of the Individual Savings Account (ISA) system. From 6 April 2027, individuals under age 65 will be restricted to £12,000 per year in cash ISAs, down from the current £20,000. The overall ISA allowance remains £20,000, but this means younger savers will be required to allocate at least £8,000 annually to investments if they wish to fully utilise the allowance. Individuals aged 65 and over will retain the ability to place the entire £20,000 allowance into cash.

For expats, the immediate practical effect is limited, because non-residents cannot subscribe to ISAs. However, this becomes important the moment someone returns to UK residence. The ability to build a significant tax-free cash buffer using ISAs has been reduced, and returners will face a more constrained savings landscape, with mandatory investment exposure if they want full tax-free shelter.

Existing ISA funds are not affected. The change applies only to new contributions from the 2027–28 tax year onwards.

Higher taxes on dividends, savings interest and rental income

This Budget was clearly designed to raise revenue from wealth rather than from work. Dividend tax rates will increase by two percentage points from April 2026. From April 2027, tax on savings interest and on rental income will also rise by two percentage points across all bands.

For many British expats, the biggest impact will be on UK rental income. A very high proportion of globally mobile clients retain UK buy-to-let property, and these changes will reduce after-tax yields at a time when maintenance costs, mortgage rates and regulatory obligations are already significant.

Savings income and dividends will also take a hit. The government is deliberately narrowing the tax differential between income from labour and income from assets. While not unexpected, the increases add to the cumulative tax burden for individuals with UK investments.

In addition, allowances and reliefs will in future be applied first against earned and trading income, rather than savings or investment income. This reduces planning flexibility and will further increase the effective tax rate for many UK-connected investors.

A new annual levy on high-value UK property

Another notable introduction was an annual charge on UK residential properties worth more than £2 million from April 2028. This measure has the characteristics of a mansion tax, with fixed bands starting at around £2,500 per year and rising with property value.

Non-resident owners are fully within scope, meaning British expats who retain high-value UK homes will incur this annual charge regardless of where they live.

For clients holding UK property for strategic, sentimental or legacy reasons, this new recurring cost must be factored into long-term planning. Combined with higher rental income taxation, the overall return profile of UK property is deteriorating.

Inheritance Tax to apply to pensions from 2027

Budget 2025 confirmed the introduction of Inheritance Tax (IHT) on most unspent pension funds and pension death benefits from 6 April 2027. This is one of the most significant changes to long-term wealth planning in years. Pensions will no longer sit outside the estate by default.

Under the new rules:

• Personal Representatives (PRs) will be responsible for reporting and settling any IHT due on pension death benefits
• PRs will be able to instruct scheme administrators to withhold up to 50 per cent of benefits for up to 15 months to meet the tax
• Death-in-service benefits will remain outside the estate

This alters the calculus for pension-rich clients, including expats with large UK schemes. It removes the long-standing advantage of leaving pensions untouched for inheritance purposes, and it places new emphasis on liquidity planning for executors.

NIC benefits on pension salary sacrifice restricted

From April 2029, the National Insurance saving on pension salary-sacrifice arrangements will apply only to the first £2,000 of contributions per year. Salary sacrifice has long been a valuable tool for reducing tax and National Insurance Contributions (NICs) for employees. This change sharply reduces its utility, particularly for higher earners still on a UK payroll or for clients returning to UK employment.

Removal of voluntary Class 2 NICs for expats

The Chancellor confirmed the government’s intention to remove access to voluntary Class 2 NICs for individuals living abroad. Class 2 NICs have historically offered an affordable route for expats to maintain or enhance their UK State Pension entitlement. Once this change is implemented, expats wishing to preserve their contribution record may be forced to rely on the more expensive Class 3 contributions instead.

Detailed rules have not yet been published, but this will have meaningful implications for State Pension planning.

VCT, EOT and wider relief reductions

The Budget also included reductions in relief on certain tax-advantaged investment structures. Income-tax relief on Venture Capital Trust (VCT) investments will fall from 30 per cent to 20 per cent from April 2026. Capital Gains Tax relief on qualifying disposals to Employee Ownership Trusts (EOTs) will be cut from 100 per cent to 50 per cent with immediate effect.

These changes will affect UK-resident clients and returning expats who rely on UK-structured tax-efficient investment or succession plans.

Threshold freeze extended to 2031

The freeze on personal tax thresholds and National Insurance thresholds has been extended to 2031. With inflation and wage growth, fiscal drag will increase the effective tax burden over time. Anyone returning to the UK will feel the impact of higher effective taxation without headline rate changes.

Market reaction and macro context

Interestingly, UK markets moved broadly higher following the Budget announcement, but this was largely in line with global market movements rather than a reflection of the tax measures themselves. The UK continues to face weak fiscal conditions, and the Office for Budget Responsibility downgraded growth forecasts from 1.3 per cent to 1.0 per cent. In that context, there was little room for a pro-growth agenda.

The Budget was not as severe as many feared, largely because pre-Budget rumours were unusually dramatic. However, even without the more extreme measures speculated upon, many individuals will still be materially worse off as a result of the cumulative tax increases and structural changes.

What happens next

Over the next several days and weeks, detailed HMRC and Treasury notes will clarify important operational questions, including the precise implementation of the mansion tax, transitional ISA rules, Class 2 NIC timelines, technical pension IHT mechanics and the new ordering of allowances. We will analyse each release as it becomes available and incorporate these details into our advice and planning.

For now, the direction of travel is unmistakable. This Budget continues the government’s shift toward raising revenue through broader taxation of wealth, asset income and long-term savings. For expats and globally mobile families, it reinforces the importance of strategic planning around where assets are held, how income is structured, and how retirement and inheritance objectives are managed.

If you would like a personalised review of how these changes may affect your financial planning, please contact us.