London, November 27, 2025
The UK Chancellor, Rachel Reeves, announced in Budget 2025 the abolition of the dividend tax credit for non-UK residents, effective immediately, significantly increasing tax burdens on expatriates and foreign investors holding UK shares to boost government revenue.
Key details of the change reveal that non-UK residents will no longer benefit from the dividend tax credit on UK dividend income. This policy shift means that foreign investors, including those living abroad with UK pensions or investment portfolios, will face higher tax charges on their dividend earnings, directly reducing their net income.
The abolition primarily targets expatriates and non-UK investors, marking a notable departure from previous tax treatments of dividend income. While UK residents remain unaffected for now, the move signals a potential broader governmental effort to increase taxation on investment returns within the UK tax system. This raises concerns among individuals planning retirement income and those reliant on dividends as a significant portion of their future earnings.
This tax adjustment forms part of a wider government strategy aimed at increasing tax certainty and enhancing revenue collection from major investment projects. To complement this, the government is introducing an Advance Tax Certainty Service to provide clarity and predictability for large investors, though perceived as a trade-off against higher taxes on some investors, particularly non-residents.
Looking ahead, detailed provisions and legislative frameworks of this adjustment will be disclosed in the forthcoming Finance Bill 2025 to 2026 and the Overview of Tax Legislation and Rates (OOTLAR). These documents are expected to clarify the full scope and operational details of the tax change while prompting further debate among policymakers, financial professionals, and global investors concerning the long-term implications for cross-border investment and UK expatriates.
The Chancellor’s decision to eliminate the dividend tax credit for non-UK residents represents a decisive shift in UK fiscal policy towards investment income. By reducing dividend income for many investors abroad, it underscores a trend toward tightening tax policies that could presage additional reforms affecting UK taxpayers in the future.