Autumn Budget 2025
In line with previous government policy, further announcements were made to ensure that UK taxpayers are treated the same regardless of where they live or originate from.
Voluntary national insurance contributions
It is currently possible for those living and working overseas to ensure their state pension records are fully paid up, by choosing to pay class 2 national insurance at the generous rate of £3.50 per week. It was only necessary to have lived in the UK for three years prior to be able to access the UK state pension. From 6 April 2026, access to this rate will be abolished, meaning those overseas will only be able to use the class 3 national insurance rate, whilst they will have to have been resident in the UK for ten years prior.
In a related announcement, the rate of voluntary class 3 national insurance will increase from the current rate of £17.75 so that, in future, those non-residents wishing to contribute will have to pay £18.40 per week, or £956.80 per annum from 6 April 2026.
Dividends paid to temporary non-residents
From 6 April 2026, all dividends received from close companies by a non-resident shareholder will be charged to tax on return to the UK during a period of temporary non-UK tax residence. This alters the previous position where distributions made from “post departure” company profits were not chargeable on return to the UK.
In an improvement for the taxpayer, new provisions will be introduced to ensure that double taxation relief is available, even if not already covered within a double tax treaty.
Non-resident dividend tax credit
At present, if a non-resident taxpayer receives a dividend from a UK company, they receive a notional tax credit of 8.75%, often meaning that no further tax is due. This tax credit is not refundable but does mean that those living overseas are in a better position than those in the UK. To correct this perceived unfairness, from 6 April 2026 this tax credit will be abolished. This will not impact the current disregarded income rules.
It is notable that the policy paper states, “It will impact fewer than 1,000 non-resident individuals a year”, which appears understated given the number of cases we see each year.
