Autumn Budget 2025

What it Means for the Channel Islands

From personal tax changes to property surcharges, the UK Government’s latest Budget introduces wide-ranging measures with implications for individuals and businesses across the Islands.

On 26 November 2025, Chancellor Rachel Reeves unveiled the UK Government’s Autumn Budget under the banner “Strong Foundations, Secure Future.” While avoiding any single major tax hike, the Budget raises revenue through a diverse set of measures – many with direct relevance to the Channel Islands. From adjustments to dividend and property income tax rates to new rules on inheritance tax and UK real estate, the scope of change is significant. In this update, we outline the key announcements and their potential impact, helping you navigate the new landscape with clarity and confidence.

This was a Budget subject to weeks of speculation, leaks, denials and rumour, capped off with a leak of the OBR budget report in the hour before the Chancellor stood at the dispatch box.

The Budget was widely expected to be an exercise in raising revenue, and this proved to be true. The Chancellor avoided any single large revenue-raising measure, instead finding funds from a variety of sources. Focusing specifically on the Channel Islands, a number of policy measures were announced, some with immediate effect, which may impact individuals and businesses on the Islands.

Personal taxation

Whilst not as wide-ranging as the 2024 Budget, a number of measures were announced to raise additional income tax revenue, particularly in respect of “passive” income. Key measures include:

  • Increase of 2% on income tax applied to dividends, savings and property income: Additional measures announced change income tax rules such that reliefs and allowances are applied to other sources of income first before being applied to dividends, savings and property income.  The measures have effect from April 2026 for dividend rates and April 2027 for savings and property income tax rates
  • Removal of tax credits on dividend income for non-resident individuals: The availability of the ordinary rate tax credit was a legacy of the credit that was previously available to UK resident taxpayers. Whilst the credit was removed for UK residents in 2016, no change was made for non-residents in receipt of UK dividend income. The measures have effect from April 2026
  • Personal tax offshore anti-avoidance legislation: The Government has been consulting on changes to the existing anti-avoidance regime, including the settlements legislation and transfer of assets abroad provisions. The Budget announced the creation of small working group of external experts to shape future policy. The Government’s stated ambition is to substantially simplify and modernise the legislation, which is to be welcomed. 
  • Distributions from close companies: Changes have been introduced impacting “temporary non-residents”, individuals who leave the UK temporarily, returning to become UK tax resident within a six-year period. Such individuals are taxable on their return to the UK on certain categories of income and gains. Currently distributions from a “close company” are outside the scope of the charge if the distribution is made from profits arising after the individual left the UK. This exemption is removed with the announced change, effective from April 2026. 
  • Consultation on tax regime for “high-talent new arrivals”: The Budget mentions an intention to seek views on developing a tax regime to attract global talent and internationally mobile individuals. The Budget notes the Government will call for views “in due course” on the design and scope of any regime.

UK land and real estate taxation

  • High value council tax: One widely expected measure is the council tax surcharge on high-value UK property, sometimes called the “mansion tax”. The surcharge will apply from 2028 and introduces a £2,500 surcharge on properties valued at over £2m, increasing to £7,500 for properties valued at over £5m.
  • Agricultural property held offshore: Within the budget document were a number of IHT measures. Amongst those measures announced is a change to the IHT treatment of agricultural property held via an offshore vehicle to align the IHT treatment with UK residential property. With effect from 6 April 2026, enveloped agricultural property will be treated as a UK situs asset subject to UK IHT, irrespective of the fact it is held through an offshore vehicle. 
  • Tax transparency on real estate: The Government have announced their intention to participate in the OECD real estate tax transparency initiative from 2029 or 2030. The initiative requires countries to automatically exchange “readily available” information relating to real estate holdings, income and transactions. The UK’s beneficial ownership register will provide a significant source of readily available information which may be subject to such automatic exchange. 
  • Non-residents’ CGT – application to protected cell companies: The application of CGT to protected cell companies (‘PCC’) is clarified to note that, for the purposes of the 75% property rich test for CGT purposes, each cell in a PCC is to be considered independently and subject to tax accordingly. The change has effect immediately. A further change legislates an extra statutory concession that certain investors in a collective investment vehicle are not required to make a double tax treaty claim by return.

Inheritance tax 

Inheritance tax was subject to fundamental reform at the last Budget with the move from domicile-based taxation to residence-based taxation. The 2025 Budget introduces further measures to manage the impact of those changes.

  • Inheritance tax cap: For trusts holding excluded property at 30 October 2024, the Budget introduces an IHT cap such that the maximum IHT liability of £5m that can be levied on such a trust in respect of previously excluded property. This cap applies across each 10-year anniversary period and covers both anniversary charges and exit charges. The cap is effective retrospectively from April 2025. 
  • Removal of exit charge exemptions: Alongside introducing the IHT cap, the Budget removes a potential exemption for exit charges for trusts where the settlor ceases to be a long-term UK resident. Under the rules as drafted, an IHT exit charge may arise in respect of trust assets at the date the settlor ceases to be a long-term UK resident. This exit charge did not apply in respect of UK situs assets, and no exit charge applies on the moving of UK situs assets to be non-UK situs. There was therefore the possibility for trustees to move assets to the UK to become UK situs prior to the settlor losing long-term residence status, then taking them back offshore after the change in long-term residence status occurs. The change in the Budget, effective immediately, closes this route and applies the exit charge on the moved assets. 

Other tax measures 

Other tax measures announced in the Budget which may impact Island residents include:

  • The introduction of an Advance Tax Certainty Service from July 2026 to provide HMRC’s binding view of tax law to major UK investment projects, providing tax certainty to investors.
  • Removal of £135 low value consignment relief for VAT
  • Significant increases in remote betting and gaming levies
  • Expansion of eligibility for Enterprise Management Incentive share option schemes
  • Removal of voluntary class 2 contributions for internationally mobile employees leaving the UK
  • 3-year SDRT holiday on newly listed shares or securities 
  • Additional investment in HMRC debt collection and fraud investigations

In choosing to raise funds through a variety of measures, the scope of changes to the tax code is wide-ranging. A fuller breakdown of all the tax measures in the Budget can be found on the BDO UK website.

The Finance Bill will be published in the coming weeks where we expect further details on the measures announced above.

Zaeem has many years of experience advising individuals and businesses investing into the UK via the Channel Islands. If you have any questions or concerns about your business' tax position or the implications of the Autumn Statement please get in touch with Zaeem or our tax team who will be happy to help.