UK Budget 2025: key points for international advisers
Insight
Following our general Budget briefing published on Wednesday 26 November (see here), we are now setting out the main aspects of the Budget in relation to our international clients.
The UK Budget was announced on 26 November 2025, setting out tax changes and spending plans for the year ahead. Major changes, which had previously been floated – such as an exit tax and a wealth tax – did not materialise, and the four-year residence scheme introduced earlier this year (the FIG regime) remains largely untouched.
Here are the key points arising from the Budget for our international clients.
Foreign Income and Gains (FIG) regime unchanged
The FIG regime, effective from 6 April 2025, stays. It is still available for people moving to the UK for the first time or after living abroad for at least 10 years. Foreign income and gains are tax-free for the first four years in the UK. After that, normal UK tax rules apply.
The regime is highly competitive compared to similar jurisdictions, although shorter than most. Relief is complete, with no need to keep profits offshore, and there is no lump sum or entry charge for using it. However, the relief must be claimed, so it requires extensive reporting which might be off-putting for some.
Inheritance tax - long term residents (LTR) regime unchanged
There is no significant change to inheritance tax (IHT) exposure. For the first 10 years of UK residence, individuals are only subject to UK IHT on UK assets. After that, if they have been UK resident for 10 out of the previous 20 years, they become 'long-term residents' for IHT purposes, and their worldwide assets fall within the UK IHT net.
To avoid becoming an LTR, individuals need to leave the UK before the end of the ninth year. There is also a 'tail' rule: after leaving, they remain within the UK IHT net for between three and 10 years, depending on how long they were UK resident before departure.
Some IHT relief for large trusts
Under the old rules, trusts set up by non-doms were free from UK IHT forever. The new regime changed this. Once the settlor has been UK resident for 10 years (see above), the trust comes within the '10-year charging regime'. This means it faces tax charges of up to 6% every 10 years and when assets leave the trust – even if the settlor cannot benefit from the trust.
The Budget announced a cap for these charges: for certain trusts created before 30 October 2024, all charges for each 10-year period – including the 10-year charge and any exit charges – will be limited to £5m. This is fairly minor in the grand scheme of things for international clients remaining in the UK, but it is nevertheless good news for those with very large trusts (worth £100m+). Smaller trusts get no relief and may struggle to fund the tax.
Review of trust and offshore structure taxation
The current rules for taxing trusts and offshore structures are extremely complex. They involve calculating income and gains pools, matching distributions to those pools, and applying subjective motive tests. These rules are often difficult to apply in practice and create significant uncertainty for advisers and clients.
The Government has announced a review aimed at simplifying and clarifying these rules. The consultation is at an early stage, and no concrete proposals have been published yet. Changes are not expected before 2027, but the stated goal is to make the regime easier to understand and apply without reducing its effectiveness.
Mansion Tax
A new property tax will be introduced from 6 April 2028. It only applies to homes worth over £2m. Annual charges range from £2,500 to £7,500. This is a small surcharge, not a full wealth tax – and far less severe than many feared before the Budget. The expression 'Mansion Tax' is in some senses misleading, but no doubt has been adopted for political reasons.
Talent measures
The UK wants to attract skilled people. A new five-year Global Talent visa starts in late 2025 with relocation support. Employee share schemes will expand in 2026, making it easier for companies to offer shares to staff.
Anti-avoidance focus
The Government increases the intensity of its focus on tackling tax avoidance. The Budget reinforces this theme with further measures targeting offshore structures and disguised pay schemes. HMRC will gain stronger powers and impose bigger penalties. Most changes take effect from April 2026. Expect the ongoing pattern of more checks and enquiries to continue.
The move towards an increasing focus on tackling tax avoidance is likely to mean the rise in tax enquiries seen over recent years will continue. Wealthy individuals should take proactive steps to make sure they are fully compliant and ready to deal with any enquiry as efficiently and quickly as possible. Read our article UK tax disputes: managing tax risk here.
UK Budget 2025 insights
The 2025 Budget marks a defining moment for the Government’s fiscal strategy, with measures aimed at stabilising the economy and supporting sustainable growth through uncertain times.
At Farrer & Co, we examine what the announcements mean in practice. From tax and property to employment and private wealth, our lawyers consider the Budget’s key provisions and the opportunities they create across sectors. Our insight is designed to help clients anticipate change and plan strategically for the year ahead.
This publication is a general summary of the law. It should not replace legal advice tailored to your specific circumstances.
© Farrer & Co LLP, November 2025
