Time for another UK Budget and the first by Chancellor of the Exchequer John Healey under the new Andy Burnham government.
Following every Budget or Statement, I write an article to give you a concise overview of some of the main points, with particular reference to any changes that have major relevance to those living outside of the UK, and especially in the GCC.
This time there are measures that will affect overseas landlords, pensions, and non-resident property owners.
The UK press will cover many points in detail but much of it will not be directly relevant to expats, or to people who are no longer tax resident in the UK, so my summaries focus on the points that will be most relevant to us.
I try and keep to the important and relevant points, the things that you need to know, as I appreciate it is rarely exciting reading!
As ever, there has been a great deal of speculation in the UK media, much of it of little use and only to fill pages.
What we did know ahead of time is that Burnham has committed to Labour’s 2024 manifesto pledge not to raise the rates of income tax, employee National Insurance or VAT.
Together those make up almost 60% of UK tax receipts.
Healey had pledged support for both household and businesses as we all aware that the UK is living through a “difficult moment”, caused by the fallout of the US-Iran war. A difficult moment shared by many around the world.
The economic background
The UK currently faces higher borrowing costs than many major developed economies, at a level not seen for decades. All the G7 countries have seen increased costs. Despite this the UK has seen comparatively strong GDP growth and the IMF forecasts that the UK’s deficit reduction will be bigger than any other G20 country.
The cost of servicing the debt is very high and there is a goal to get the UK’s finances “into the black” within three years
The UK economy grew by 0.1% in August after 0.4% in July, though inflation increased to 3.5%, with higher claims in subsequent October reports, amid the high public borrowing costs. It has been pushed up by a sharp increase in petrol and diesel prices as global conflicts squeeze oil supplies.
The biggest factor for the economy is the outlook for inflation, largely due to increasing energy costs due to war in the Middle East. Those of us living in the region know all too well about this issue.
UK inflation is now forecast to be 3.1% this and 3.4% in 2027, significantly higher than was forecast in March.
Debt as a percentage of GDP is planned and forecast to fall over the next few years.
It is expected to hit 83.2% in the 2026/27 tax year. It is planned to fall to 82.2% in 2029/30, meeting the investment rule with a margin.
The Office of Budget responsibility (OBR) confirms that the war in the Middle East is a key driver affecting today’s forecast.
Following the Budget today, the Pound has edged slightly higher against the US Dollar, trading around $1.3296, up from the $1.328 mark. Meanwhile, against the Euro, it remains steady with the Euro converting at 83.74p.
Non-residents – the quick facts
A change that will affect many non-residents is the increase of 2% on tax on income from property and savings from April 2027.
This is in addition to a planned increase of 2% announced last year, and also due to come into effect in April.
This means that from April of 2027, the rates of tax will increase by a total of 4% to 24%, 44% and 49%, dependent on the relevant tax band.
The Personal Allowance will still apply so tax is only payable above UK income of £12,570 per person per tax year. (Exception is if UK income reaches £100,000 at which point it starts tapering off, disappearing completely at £125,140.)
For a couple who own property, they can receive annual UK rental income over £25,000 before having a UK tax liability. That will be the majority of non-residents.
No changes in earned income tax on income arising in the UK.
No change to tax on dividends from business or investment.
Bear in mind that even though you may be UK non-resident for tax purposes, you will still be liable for tax on income “arising in the UK”, in the vast majority of cases.
Many non-residents have rental income, receive dividends, interest on savings and income from investments.
UK pensions are still subject to UK income tax although steps can be taken in some cases to reduce liability. (Get in touch for proper advice on this.)
If you are resident in the GCC, you can save and invest offshore and not be liable to UK taxes on profit and growth. Naturally caveats apply but often steps can be taken to reduce liabilities, fully legally.
UK tax liabilities for non-residents are more complicated than many people seem to think. The number of days you can spend in the UK before having a liability to UK tax may be rather less than you might think.
Take advice so you don’t get in wrong. Get in touch for professional advice.
Non-resident companies supplying business-to-business (B2B) services into the UK will face new administrative requirements from April 2027. This relates to the charging of VAT.
Tightened anti-avoidance measures for offshore companies.
Main taxes
Adhering to the 2024 manifesto, there will be no general rate increases to Income Tax, employee National Insurance, or VAT.
The 2%, now 4%, increase on property and investment income also applies to UK tax residents.
No changes to taxation on dividends.
No change to ISA allowances
Energy
High energy prices and a potentially harsh winter ahead is a cause for concern for many.
The VAT cut on energy bills has been extended and the gas standing charge is being removed Electricity bills will follow next year.
Council Tax bands A-D – a £100 energy payment to assist with rising energy bills to be paid directly to bank accounts. This is to help with costs over the coldest months of the year and should affect 20 million households right across the UK.
There is a further extension of the 5p fuel duty cut until next July. It has been due to end in January.
Climate Change Levy on electricity to be frozen from 1st April 2028.
There will be further research on increasing the UK’s energy security, encompassing many areas. Further investment into renewable and low-carbon energy. The goal is cheaper energy, and cleaner energy.
Pensions
The triple lock policy means that the state pension will go up in line with average wage increases, at 3.9%.
he flat-rate state pension for those who reached state pension age after April 2016 will be £250.70 a week, or £13,036.40 a year, up £488.
The old basic state pension for those who reached state pension age before April 2016 will be £192.10 a week, or £9,989.20 a year, up £374.40
A new Pension Tax Allowance is to come into effect from April 2027 so that pensioners with an income up to the value of the full new state pension will not pay income tax.
Some changes to allow for easier consolidation of certain pension plans, and allow for protections to be maintained.
Paternity leave
Paid parental leave for the self-employed, although not until 2029.
Self-employed fathers, who have previously missed out on payments of up to £194 a week, will be able to claim for two weeks.
UK investment by foreign sovereigns
The Chancellor said he will “modernise” the tax treatment of investment of foreign sovereigns.
A foreign sovereign refers to a foreign state, its head of state, its government, or specific state-controlled entities that act on behalf of a country outside the UK.
That is likely to mean a tightening of the beneficial treatment enjoyed by direct overseas foreign investment, meaning they are often protected from direct taxation
Not many details as yet but Healey said this will bring UK rules more in line with other countries, while remaining “one of the most generous regimes in the world”.
I expect that entities in this region will be watching closely.
Other points
Some of these were announced ahead of the official Budget announcement but these are the need-to-know bullet points:
- VAT removed from domestic electricity bills from 1 October
- 20% cut in business rates for pubs, clubs and live music venues from April 2027
- A 2% tax increase on beer
- Tariffs removed from over 100 supermarket goods
- A further extension of the 5p fuel duty cut until July 2027.
- Major investment in AI security and cyber defence
- Increased taxes on gambling companies
- £1.5b extra for social/affordable homes, to deliver 10,000 more homes
- National Minimum Wage and National Living Wage to increase by 3.9%
- A temporary increase in Bank Surcharge Corporation Tax from 3% to 6%, for 15 months from January 2027.
- Self assessment income tax reforms from 2029. Payments over time
- Additional financial support to small alcohol producers
- Plans to tackle high energy cost for businesses
- Continuation of work on welfare reform
- New first time buyer ISA to replace Lifetime ISA – only relevant if UK resident
- Increase in HMRC capacity and staff
- NHS single prescription charges remain frozen at £9.90 until April 2028
A Carers Allowance, so people don’t lose their entire allowance when they earn over the Personal Allowance threshold but not until 2030.
As of now the £86.45 per week Carer’s Allowance all gets clawed back if the carer takes on paid work above a 35-hour limit, or gets a wage increase of a few pence.
A Fiscal Devolution Roadmap has been published today. I have not read that one but it is something has been expected. It proposes a new funding model for local and regional governments.
The Budget also includes quite a bit of detail about regional investment but that is not relevant to the purpose of this summary
My thoughts
A perhaps surprisingly, well-natured Budget delivered by a very relaxed Chancellor.
Nothing to scare the horses and some small financial help on energy.
This was billed as “do no harm” Budget and that is supported by the OBR assessment which shows that both new spending and new tax-raising measure are more modest than in recent years.
Many lower income households will see a benefit from the energy cost changes.
In terms of energy investment, any responsible government has to look to the future. The reality is that clean energy is the future we all need. It’s not a linear change, it will take time, but renewables are what the planet will need.
I don’t watch or listen to PMQs very often but always watch the Budgets and Treasury Statements. Every time I am appalled at the shouting and jeering, especially from the back benches. Today, the deputy speaker called out several MPs by name for poor behaviours and some still persisted. I’d die of embarrassment if that was me.
I have read through the full Budget for October 2026 as issued by HM Treasury (a riveting 166 pages this time!) and there is nothing else specifically related to taxing expats.
I write articles such as this one as part of the personal financial planning service and that I provide to UAE and GCC resident, and the general consumer, financial and legal information that I provide in The National newspaper, other UAE media, and on the Facebook group British Expats Dubai.
To arrange a meeting to discuss any aspect of your personal financial planning, please email me at keren@holbornassets.com or use this contact form.
Please take a look at the other useful articles on this website, including those mentioned below.
UK Pensions and Inheritance tax. What Brits in the UAE and GCC need to know before April 2027
Currency transfers. How to get the best rates with full security
UK Tax returns. A low-cost service