United Kingdom proposes tax reforms for foreign property investors

The United Kingdom government has announced plans to remove tax exemptions for foreign sovereign wealth funds regarding British property income and sales, effective January 1, 2029. Announced in the October Budget, the reforms aim to increase transparency and are projected to raise £690 million in the 2029–30 financial year.

The changes target foreign governments and sovereign wealth funds rather than individual overseas buyers. The proposed framework includes a 15 per cent tax rate for certain REIT investments. To allow for adjustment, the government is offering transitional relief on stamp duty, giving affected investors until 2029 to restructure their holdings.

Separately, domestic landlords face increasing financial pressure due to existing and upcoming tax changes. Reports from Landlord Insurance UK suggest that by April 2027, higher-rate landlords with significant mortgage interest could face tax bills that exceed their actual rental profits. This is attributed to Section 24 restrictions on mortgage interest deductions and the implementation of new property income tax rates of 24 per cent, 44 per cent, and 49 per cent.