UK Spring Statement 2026: What British Expats Need to Know

March 2026

By Will Glyn

The Chancellor delivered the Spring Statement on 3 March 2026. While the government had pledged to limit major tax announcements to the annual Autumn Budget, several significant changes were confirmed — many of which have direct implications for British expatriates. Here is our summary of the key developments affecting expats living overseas.

The Bigger Economic Picture

The Office for Budget Responsibility (OBR) forecasts that GDP growth will slow to 1.1% in 2026, with inflation expected to reach its 2% target only in late 2026. Unemployment is projected to peak at 5.33% in 2026, and the tax-to-GDP ratio is forecast to reach a post-war high of 38% by 2030/31. The fiscal message is clear: further tax rises cannot be ruled out, and the era of tax cuts remains firmly on hold.

For expats with ongoing financial ties to the UK — whether through property, pensions, investments, or eventual plans to return — this environment makes proactive tax planning more important than ever.

UK Rental Property Owners: Higher Tax Rates Coming in 2027/28

This is arguably the most significant announcement for the large number of British expats who retain UK property and let it out while living abroad.

From 2027/28, the government is introducing separate, higher tax rates specifically for property income:

• 22% for basic rate taxpayers (up from 20%)
• 42% for higher rate taxpayers (up from 40%)
• 47% for additional rate taxpayers (up from 45%)

This means that if you receive UK rental income, you will soon be paying more tax on it regardless of where you live. For expats who are non-UK resident, UK rental income is still subject to UK tax under the Non-Resident Landlord scheme, and this rate rise will apply to you just as it does to UK residents.

If you have a UK rental property, now is the time to review your structure, consider whether the rental income is reported correctly through HMRC's Non-Resident Landlord scheme, and explore whether any restructuring makes sense before April 2027.

Pensions and Inheritance Tax: A Major Change from April 2027

The government has confirmed that unused pension funds and death benefits payable from a pension will be brought into a person's estate for Inheritance Tax (IHT) purposes from 6 April 2027. This is a fundamental shift that affects anyone with a UK pension — including expats who have accumulated pension wealth during their working years in the UK.

Previously, unused pension funds sat outside your estate for IHT purposes, making them an attractive wealth transfer vehicle. Under the new rules, those funds will form part of your taxable estate and could be subject to IHT at 40%.

To illustrate the impact: a person with a pension valued at £400,000 and an estate of £1,000,000 currently faces an IHT bill of around £270,000. Under the new rules, that rises to approximately £430,000.

Note that death in service benefits from registered pension schemes will remain outside the estate. However, the change is significant enough to warrant an urgent review of your pension and estate planning arrangements, particularly if:

• Your UK pension fund is substantial
• You are a non-dom or non-UK resident with complex estate planning already in place
• You had relied on your pension as a tax-efficient way to pass wealth to your children

Inheritance Tax Thresholds Remain Frozen

The nil rate band remains frozen at £325,000, and the residence nil rate band stays at £175,000 — both frozen until April 2031. For expats who still hold UK assets (property, investments, or business interests), this ongoing freeze means more estates will be pulled into the IHT net as asset values rise.

The residence nil rate band is only available where a UK residential property is passed to direct descendants, which can be complicated for expats whose primary residence is overseas. We strongly recommend reviewing your estate structure if you have not done so recently.

UK Investment Income: Dividend and Savings Tax Rates Rising

Many British expats retain UK investment portfolios, ISAs, and savings accounts. Two key changes to note:

Dividends

From 6 April 2026, the rates of Income Tax on dividends are rising by 2 percentage points:

• Basic rate taxpayers: 10.75% (up from 8.75%)
• Higher rate taxpayers: 35.75% (up from 33.75%)
• Additional rate taxpayers: 39.35% (unchanged)

The £500 Dividend Allowance is retained for 2026/27. While many expats may not be subject to UK income tax on dividends depending on their country of residence and the applicable Double Tax Agreement (DTA), this change is relevant for those who do have UK tax exposure on dividend income.

Savings Income

Savings tax rates will also rise by 2% from 6 April 2027, bringing the basic rate on savings to 22%, the higher rate to 42%, and the additional rate to 47%. Again, DTAs may mitigate UK liability depending on your country of residence, but this should be reviewed with a specialist.

ISA Changes: Cash ISA Limits Restricted from April 2027

While non-UK residents cannot make new contributions to ISAs, many expats retain ISA portfolios accumulated during their UK years. From 6 April 2027, the annual ISA cash limit will be capped at £12,000, with the remaining £8,000 of the £20,000 allowance designated for stocks and shares investment only. This restriction does not apply to those over age 65.

This change reflects the government's desire to redirect ISA money into investment markets rather than cash savings. For expats planning to return to the UK and resume ISA contributions, this is worth factoring into longer-term planning.

Capital Gains Tax: Business Asset Disposal Relief Rate Rises

For expats who own UK businesses or are considering selling, the rate applying to Business Asset Disposal Relief (BADR) — previously known as Entrepreneurs' Relief — increases to 18% for disposals on or after 6 April 2026 (up from 10%). Investors' Relief also moves to 18%.

If you are planning a business sale, the timing of the disposal now carries greater tax significance. The annual CGT exemption remains at £3,000 for 2026/27, and the main CGT rates are unchanged.

Income Tax Thresholds: Frozen Until April 2031

The personal allowance remains at £12,570, the higher rate threshold at £50,270, and the additional rate threshold at £125,140 — all frozen until April 2031. While expats living overseas and paying tax in their country of residence may not be directly affected, those with UK-sourced income (such as rental income, pension income, or UK employment) will increasingly find more of that income dragged into higher rate bands as the years pass.

How We Can Help

The Spring Statement 2026 contains a number of changes that, while sometimes presented as affecting UK residents, have real and direct consequences for British expats — particularly around rental property tax, pension and estate planning, and investment income.

At Proctor Wealth Associates, we work with British expats living abroad to ensure they are connected with the right regulated specialists — whether that is a tax adviser or estate planning solicitor — to navigate these changes effectively.

If any of the above changes affect your situation, we would be happy to have a conversation. Book a free introductory call with us here:

www.pwa-intl.com/book

Disclaimer: This article is for information purposes only and does not constitute financial, tax, or legal advice. Tax rules are subject to change and their effect depends on your individual circumstances. Please seek advice from a qualified specialist before taking any action.

Will is an Independent Financial Adviser with over a decade of experience helping expats make the most of their international status.