UK tax changes following the Autumn Budget
The UK’s latest budget announcement will introduce several changes that could impact Australians with financial interests or tax obligations in the UK. From adjustments in tax rates and allowances to new policies affecting property, pensions, and investment income, these changes may influence how Australian tax residents with UK ties manage their financial affairs. The Salann team have summarised the key takeaways from the budget and what they mean for Australians navigating cross-border tax considerations. Whether you’re a retiree with UK pension income, an investor with UK assets, or have other financial interests in the UK, these changes may impact your tax position.
Pensions
The UK Government has announced that from April 2027 unspent pension pots (including death benefits payable from a pension) will be brought into a person’s estate for IHT purposes. The usual exemptions for spouses will continue to apply. For Australian residents with UK pensions this is another reason why you may want to consider transferring your pension to Australia.
Inheritance Tax (IHT)
From April 2026, 100% relief from IHT will be restricted to £1 million for agricultural and business assets. Amounts over £1 million will receive 50% relief. UK stocks listed on the Alternative Investment Market (AIM) will be subject to a 20% IHT rate providing for a tax-efficient vehicle for long-term investments. The IHT nil rate band of £325,000 and the residence nil rate band of £175,000 have been frozen for an additional two years, extending to 2030.
Capital Gains Tax (CGT)
From 30 October the lower CGT rate will rise from 10% to 18%, and the higher rate from 20% to 24%. However, CGT rates on residential property sales, including main residences, will remain at 18% for basic rate taxpayers.
The annual CGT allowance remains unchanged at £3,000, while the £1 million lifetime limit on capital gains under business asset disposal relief (BADR) is intact.
The CGT rate on business sales will, however, rise to 14% in 2025 and to 18% in 2026. Carried interest CGT will also increase to 32% from April 2025, with further reforms expected in 2026.
Foreign Income and Gains (FIG)
From 6 April 2025 the new FIG regime, a residence based tax, will replace the non-domiciled remittance based regime. For Aussies moving to the UK or UK expats returning home after a period of more than 10 years overseas, this will mean they are only tax on their UK source income in the first four years. This means that individuals with Australian super returning to the UK in their retirement days will be able to benefit from no UK tax on their Australian super, if structured correctly.
If you’re wondering how these changes might affect your tax situation, now is the time to get personalised advice. Contact us today to discuss the potential impact on your UK and Australian tax obligations and explore how to optimise your cross-border tax strategy. We’re here to help you navigate these changes with confidence.
Reach out to Ruya Ozalgan at ruya.ozalgan@salanntax.com.au or Paula Tallon at paula.tallon@salanntax.com.au, or you can book your meeting with them.
