UK Budget 2025: What Changed for British Expats and Internationally Mobile Individuals

The October 2024 Budget delivered by Chancellor Rachel Reeves was the first Labour Budget in fourteen years. It arrived with considerable anticipation — and, for many internationally mobile individuals, with genuine consequences. Several of the changes affect non-residents directly, while others have knock-on effects for UK nationals living abroad who retain UK assets, pensions, or company interests.

This guide sets out the key changes, explains how they interact with the position of non-resident individuals, and outlines the planning responses that remain available.

What Actually Changed

Capital Gains Tax Rates

The most immediately significant change for many investors was the increase in Capital Gains Tax rates, effective for disposals on or after 31 October 2024.

The basic-rate CGT band rose from 10% to 18%. The higher-rate band rose from 20% to 24%. These apply to most assets — shares, investment funds, and other capital assets.

The rates on residential property were not increased further; they were already at 18% and 24% respectively, and those rates now apply uniformly to most assets outside of qualifying business disposals. Business Asset Disposal Relief (BADR) — formerly Entrepreneurs' Relief — has a lifetime limit of £1 million of qualifying business gains. The BADR rate rose from 10% to 14% from 6 April 2025, and to 18% from 6 April 2026, narrowing the differential with the standard CGT rate.

The carried interest rate applying to private equity fund managers rises to 32%.

Why This Matters for Non-Residents

Non-UK residents who own UK residential property are subject to Non-Resident Capital Gains Tax (NRCGT) on gains arising from UK land and property. The rate was already 18%/24% — matching what has now been applied to other assets for UK residents.

For non-residents with UK-listed shares, investment bonds, or investment funds held directly (not inside an ISA or pension), the disposal of those assets before 30 October 2024 would have attracted lower rates. Going forward, any UK-situs assets generating capital gains are now taxed at the higher rates when realised.

For non-UK residents who have disposed of commercial UK property or indirect interests in UK property companies, the CGT rate increase similarly applies from 30 October 2024.

Inheritance Tax on Pensions — From April 2027

This is arguably the most significant long-term change for UK nationals abroad. From April 2027, unused pension funds and lump-sum death benefits will form part of a deceased's estate for Inheritance Tax purposes.

Currently, pension funds fall outside the estate entirely. They can be nominated to any beneficiary — children, partners, anyone — free of IHT. This has made pensions a highly effective IHT-planning vehicle for individuals who do not need to draw from their pension and prefer to leave it to the next generation.

From April 2027, this exemption disappears. The pension pot will be added to the rest of the estate when calculating the IHT liability. For non-UK residents with UK pension pots — whether a SIPP, a final salary preserved benefit, or a stakeholder pension — this changes the calculation significantly.

A non-resident who has built up a substantial UK pension over their career should review whether the pension still sits efficiently within their estate plan, and whether alternative strategies (QROPS transfer for those permanently outside the UK, or accelerated drawdown) are now worth modelling.

The Long-Term Resident Test and IHT

The Budget formalised the Long-Term Resident (LTR) test that determines whether a non-domiciled individual is subject to UK Inheritance Tax on their worldwide assets. Under the previous rules, the domicile concept was the main gateway to worldwide IHT. From April 2025, the concept of domicile is replaced by the LTR test for IHT purposes.

The LTR test applies once an individual has been UK-resident for 10 out of the last 20 tax years. Once caught by the LTR test, worldwide assets are within the scope of UK IHT — regardless of where the individual lives at the time of death, and for up to ten years after leaving the UK.

For internationally mobile individuals approaching ten years of UK residence — or who have recently left the UK after a substantial period of residence — this test is critical. The planning implication is significant: an individual who has spent 9 years in the UK and then moved abroad is approaching LTR status and needs active planning to manage the IHT exposure on worldwide assets.

Employer National Insurance

The Budget increased employer National Insurance from 13.8% to 15% on wages above £5,000 per year (the secondary threshold was reduced from £9,100 to £5,000). This is a payroll cost rather than a direct personal tax, but it is highly relevant for UK company directors who draw salary from their own company.

For a director-shareholder paying themselves a salary of, say, £50,000 from a UK company, the additional employer NI cost is material. The most common planning response is to reduce salary to a level closer to the personal allowance (£12,570) and take more income as dividends, which are not subject to employer NI.

For non-residents who are UK company directors, this change applies to salaries paid from the UK company regardless of where the director lives.

What Did Not Change

A number of widely anticipated changes did not materialise:

• Income tax rates and thresholds remain frozen (the freeze itself was already in place from the previous government's plans and is a stealth tax on earnings growth).
• The personal allowance remains at £12,570.
• The ISA annual allowance stays at £20,000.
• The pension annual allowance remains at £60,000 (or 100% of UK earnings, whichever is lower).
• The Lifetime Allowance was not reinstated, despite speculation.

Planning Responses for Internationally Mobile Individuals

Review your pension IHT position now. For those with substantial UK pension pots who are permanently non-resident and have no intention of drawing the pension in the UK, a Qualifying Recognised Overseas Pension Scheme (QROPS) transfer may become more attractive. Note, however, that the 25% Overseas Transfer Charge (OTC) applies to QROPS transfers unless the member is resident in the same country as the QROPS scheme — the EEA/Gibraltar exemption from the OTC was abolished from 30 October 2024. QROPS transfers also carry costs and conditions including the "five-year rule". Modelling the break-even — the point at which the QROPS benefits outweigh costs — is a useful exercise ahead of the April 2027 change.

Monitor your LTR position. If you have spent close to ten years in the UK and have recently left, take advice on the LTR clock. The ten-year window runs on a rolling 20-year look-back, so it is not simply about total time — it is about the pattern of UK residence. The ten-year post-departure "tail" of UK IHT exposure also requires active planning if the LTR threshold has been crossed.

Restructure director remuneration. For UK company directors who are non-resident, the salary/dividend split should be reviewed given the increased employer NI cost. The optimal salary level for a director-shareholder has shifted downwards from the perspective of employer NI efficiency.

Revisit UK property CGT position. For non-resident owners of UK property who have been considering a sale, the rate applicable to UK residential property disposals did not change (it was already 18%/24%); however, commercial property or indirect UK property gains are now at higher rates than they were before 30 October 2024.

How Global Investments Can Help

The October 2024 Budget has created genuine complexity for UK nationals abroad, particularly around pension estate planning, the LTR IHT test, and company remuneration structures. Global Investments works with internationally mobile individuals to assess their current tax position, model the impact of recent legislative changes, and identify legal planning opportunities before key deadlines arrive.

Our advice covers the coordination of UK tax advice with offshore structuring, pension transfer analysis, and estate planning across jurisdictions. We can introduce you to appropriately qualified specialists and help ensure your overall financial plan remains coherent as the UK tax landscape continues to evolve.

This article is for information purposes only and does not constitute personal financial or tax advice. Tax rules change frequently and individual circumstances vary significantly. Please seek qualified professional advice before making any financial decisions.