For Australians living in the UK, staying on top of tax obligations is essential, especially with the recent changes that took effect on April 6th 2025. These adjustments could impact income tax, property investments, and inheritance planning.
Below is a breakdown of what Australians living in the UK now need to consider.
Key UK Taxes To Consider For Residents Of The UK
1. Taxation Of Foreign Income And Gains
Historically, Australians who were UK residents but non-domiciled (“non-doms”) had the option to use the remittance basis of taxation. Under this system, foreign income and gains were taxed only if brought into the UK.
However, the UK government has abolished the remittance basis regime from April 6th. This means that Australians who are UK tax residents are now taxed on their worldwide income and gains, regardless of whether the funds are remitted to the UK.
There is a four-year exemption period for new arrivals to the UK. If you are still within your first four years living in the UK, you may be able to utilise the remaining time to make appropriate plans and implement tax strategies.
2. Overseas Workday Relief (OWR) Adjustments
For Australians moving to the UK for work, Overseas Workday Relief (OWR) has traditionally been a tax-efficient structure, reducing tax on earnings from overseas duties if kept outside the UK. With the changes, eligibility criteria has tightened, and planning must be reviewed to determine ongoing tax efficiencies and assess eligibility.
3. Capital Gains Tax On Non-UK Property
Previously, UK tax residents paid capital gains tax (CGT) on non-UK property only if they were domiciled or remitted the gains. As of April 6th, all UK tax residents—including Australians—are subject to CGT on worldwide disposals of property, shares, and other assets.
4. Property Investment And Negative Gearing
For Australians with investment properties, negative gearing (where interest and other expenses exceed rental income) has long been a key tax strategy in Australia. However, the UK does not allow full interest deductions against rental income. Instead, landlords receive a basic tax credit of 20% on mortgage interest. Additionally, recent tax changes continue to phase out certain allowances, making property investment less tax-efficient.
5. Inheritance Tax (IHT) Considerations
UK inheritance tax (IHT) applies to the worldwide assets of individuals domiciled in the UK. With domicile rules under increased scrutiny, long-term Australian residents in the UK may inadvertently become subject to UK IHT. Australians planning to stay in the UK on a long-term basis should review their domicile status and consider estate planning strategies, such as gifting and trusts, to mitigate exposure.
IHT is typically 40% of any estate above a tax-free threshold of 325,000 pounds, and some other exemptions.
Once a long-term resident of the UK leaves the UK, their UK assets will continue to be caught under IHT obligations for a number of years. This length of this “inheritance tax tail” will depend on the individual’s length of residency in the UK.
Steps Australians Should Take
- Review Worldwide Income & Gains – Ensure compliance with the new global taxation rules.
- Evaluate Property Investment Strategies – Factor in limited interest deductions and potential CGT liabilities.
- Plan For Inheritance Tax – Assess domicile status and explore estate planning options.
- Seek Professional Advice – Given the complexity of these changes, consulting with a tax advisor specialising in UK-Australian tax matters is essential.
Final Thoughts
With the UK tax landscape evolving, Australians living in the UK must be proactive in understanding their obligations. The removal of the remittance basis and adjustments to property and inheritance tax rules highlight the need for strategic planning to optimise tax efficiency while ensuring compliance.
If you are planning to return to Australia under the new rules, please review our article about returning to Australia under the new rules for more information.
For tailored advice, it’s crucial to consult a tax professional who understands the intersection of UK and Australian tax laws.
