After months of speculation, UK chancellor Rachel Reeves has finally delivered the 2025 Autumn Budget.
In last year’s Budget, Reeves focused on plugging a £22 billion “black hole” and this year she announced a further £26 billion of tax rises by 2029/30.
If you’re a Brit living overseas, you may be affected by some of the changes, particularly if you still own property in the UK or are employed by a company based there.
Read on to find out what the Budget could mean for British expats.
If you own property in the UK, you may face additional taxes
If you’re a British expat but still own property in the UK, the Budget included several changes that could affect you.
The government announced a two-percentage-point rise in tax on UK rental income, so if you let out your UK property, you will pay more.
While you’ll likely be unaffected by other tax increases on savings and dividend income (unless you’re still a UK tax resident), property income is different. UK rental income is taxable in the UK, regardless of where you live.
From April 2027, your property income will be taxed at:
- 22% for basic-rate taxpayers
- 42% for higher-rate taxpayers
- 47% for additional-rate taxpayers.
In addition, the government is introducing changes to Council Tax for higher-value homes. Properties currently in bands F, G, and H will be revalued, and any home valued at over £2 million will face a new surcharge from 2028.
Four new price bands will apply, with charges ranging from £2,500 for properties valued between £2 million and £2.5 million to £7,500 for those worth £5 million or more.
So, if you’re living abroad and still own property in the UK, these measures could increase your overall tax burden, especially if you rent out the property or plan to keep a high-value home in the UK.
If you work for a company based in the UK, you might be affected by frozen tax thresholds
In their 2024 election manifesto, Labour promised not to raise taxes on working people, ruling out direct increases to Income Tax and National Insurance (NI) rates.
However, Reeves has frozen the thresholds of both to 2031, extending an earlier freeze that was set to end in 2028. The freeze on Inheritance Tax (IHT) thresholds have also been extended to this date.
This approach is often described as a “stealth tax”, as rates stay the same, yet more of your income becomes taxable as wages rise, and more people are pushed into higher tax bands.
If you live abroad but are still a UK tax resident or pay any UK Income Tax, the frozen thresholds could apply to you.
There’s also a significant change if you contribute to a UK workplace pension using salary sacrifice.
Reeves has introduced a new £2,000 annual limit on how much of your salary you can sacrifice to avoid NI on pension contributions. You’ll still receive Income Tax relief on contributions above £2,000, but anything over the allowance will pay NI once the policy takes effect in 2029.
Changes to the UK State Pension could affect Brits overseas
The Budget brought two key updates to State Pensions that could affect you if you live abroad.
The first is that the government plans to make it harder to use the cheaper Class 2 National Insurance contributions (NICs).
At the moment, some people living abroad can boost their UK State Pension by paying Class 2 NICs, which are much cheaper than the standard Class 3 rate.
The government wants to close this loophole, and many expats may no longer be able to use the Class 2 option unless they meet stricter rules about their recent work or residency in the UK. This means it could become more expensive for expats to top up their UK State Pension.
However, the key details of this reform remain under review.
The second update regarding the State Pension was the confirmation that it will rise in line with average wages, as per the triple lock, which could mean up to £575 extra a year depending on your entitlement.
What this means for you, and how we can help
If you’re a British expat, the key takeaways from the Budget are:
- Your UK property could become more expensive to own
- Your UK earnings may be taxed more heavily over time
- Building your State Pension from abroad may get pricier, but the pension itself stays protected.
So, if you’re living abroad but are still financially connected to the UK, now is a good time to review your tax position, long-term plans for your assets, and your pension contributions.
We can help you create an international financial plan that takes into account your UK assets and holdings as well as anything you have overseas.
To speak to a financial planner with expertise in cross-border planning, get in touch.
Email contact@ambient-wm.com or call us on +34 658 077 450.
Please note
This article is for general information only and does not constitute advice. The information is aimed at retail clients only.