UK: Budget includes proposed tax on foreign sovereign investors

Consultation runs until January 20, 2027

HM Treasury has published a consultation on a major reform to replace the UK’s long standing, non-codified approach to taxing foreign sovereign investors with a new statutory sovereign tax status regime. This will particularly impact foreign sovereign investors in UK real estate. The consultation, which runs until January 20, 2027, seeks views from those affected, or who may be affected, so that the policy works appropriately, fairly, and as intended.

The proposed regime, due to take effect from January 1, 2029, will narrow sovereign immunity while introducing targeted exemptions, treatments, and transitional measures. The key change is that sovereign immunity from UK direct tax will largely cease for investment income and gains, especially from UK property, and be replaced by a codified sovereign tax status with specific exemptions and tax treatments. Those investors eligible for sovereign tax status will be subject to UK tax on:

Income from UK land
Capital gains from selling UK land or interests in UK property-rich vehicles
UK trading income

The headline corporation tax rate will be 25%, although proposed reliefs could reduce the tax payable.

Read an October 2026 report prepared by the KPMG member firm in the UK

For more information, contact a KPMG tax professional:

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UK: Budget includes proposed tax on foreign sovereign investors

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