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Finance Act 2026

Type Public General Act
Publication 2026-03-18
Last updated 2026-10-01
State In force
Department Statute Law Database
Source legislation.gov.uk
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articles Not indexed
Reform history JSON API
property additional rate section 6D (as applied by section 989)
property basic rate section 6D (as applied by section 989)
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property higher rate section 6D (as applied by section 989)
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property income section 17A (as applied by section 989)
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property trust rate section 9(1A) (as applied by section 989)
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savings trust rate section 9(1B) (as applied by section 989)
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Welsh property additional rate section 6B(1A) (as applied by section 989)
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Welsh property basic rate section 6B(1A) (as applied by section 989)
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Welsh property higher rate section 6B(1A) (as applied by section 989)
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Part 2 — Amendments of other tax legislation

TMA 1970

37

In section 7 of TMA 1970 (notice of liability to income tax and capital gains tax), in subsection (6)—

  • (a) in subsection (6)—
  • (i) after “other than the basic rate,” insert “the property basic rate, the savings basic rate,” and
  • (ii) after “the Welsh basic rate,” insert “the Welsh property basic rate,”, and
  • (b) after that subsection insert—

(6ZA) A source of income falls within this subsection in relation to any person and any year of assessment if for that year— (a) all income from the source is savings income (see section 18 of ITA 2007), and (b) the person— (i) is UK resident, (ii) is not liable to tax at the savings basic rate, (iii) is not liable to tax at the savings higher rate, (iv) is not liable to tax at the savings additional rate, and (v) is not charged to tax under section 832 of ITTOIA 2005 (relevant foreign income charged on remittance basis) on any savings income.

TCGA 1992

38

In section 1J of TCGA 1992 (section 1I: definitions and other supplementary provision)—

(ab) the property higher rate,

, and

  • (b) in subsection (5), in the words after paragraph (c), after “the default higher rate” insert “, the property higher rate, the savings higher rate”.

ITTOIA 2005

39

ITTOIA 2005 is amended as follows.

40

In sections 274AA(5) and 274C(2) (which provide for relief for finance costs relating to residential property to be given at the basic rate)—

  • (a) for “BR”, in both places, substitute “PBR”, and
  • (b) for “basic rate” substitute “property basic rate”.
41

In section 465A (gains from life insurance contracts: amounts for which individuals liable to be treated as highest part of total income), in subsection (1)(b), for “the basic rate” substitute “the savings basic rate”.

42

In section 466 (gains from life insurance contracts: personal representatives as person liable), in subsection (2), in the opening words, for “the basic rate” substitute “the savings basic rate”.

43

In section 467 (gains from life insurance contracts: trustees as person liable), in subsection (7), for “the basic rate” substitute “the savings basic rate”.

44

In section 530 (gains from life insurance contracts: income tax treated as paid etc), in subsection (1), for “the basic rate” substitute “the savings basic rate”.

45

In section 533 (meaning of “comparable EEA tax charge”), in subsection (4), for “20%” substitute “22%”.

46

In section 535 (gains from life insurance contracts: top slicing relief), in subsection (3)—

  • (a) for “BRL”, in both places, substitute “SBRL”, and
  • (b) for “the basic rate” substitute “the savings basic rate”.
47

In section 536 (gains from life insurance contracts: top slicing relief where one chargeable event), in subsection (1), in paragraph (b) of Step 2, for “the basic rate” substitute “the savings basic rate”.

48

In section 537 (gains from life insurance contracts: top slicing relief where two or more chargeable events), in paragraph (b) of Step 2, for “the basic rate” substitute “the savings basic rate”.

49

In section 539 (gains from life insurance contracts: relief for deficiencies), in subsection (8)—

  • (a) after the entry relating to the default higher and default basic rate insert—
the property higher rate the property basic rate

, and

  • (b) at the end insert—
the Welsh property higher rate the Welsh property basic rate
50

In section 669 (reduction in residuary income: inheritance tax on accrued income), in subsection (3), omit the “and” before paragraph (b) and after that paragraph insert—

(c) income charged at the property additional rate or the property higher rate were charged at the property basic rate, and (d) income charged at the savings additional rate or the savings higher rate were charged at the savings basic rate.

51

In section 680 (beneficiaries’ income etc: income treated as bearing income tax), in subsection (4), for “the basic rate” substitute “the savings basic rate”.

52

After section 680B insert—

(680C) (1) This section applies to estate income relating to a person’s interest in the residue of an estate so far as that interest relates to income that— (a) falls within section 664(2)(a) (income of personal representatives charged to UK income tax), and (b) is property income (see section 17A of ITA 2007). (2) The income is treated as being property income.

CTA 2010

53

In section 552 of CTA 2010 (distributions by Real Estate Investment Trusts)—

  • (i) for “BRT”, in both places, substitute “PBRT”, and
  • (ii) in the definition of “BRT”, for “the basic rate” substitute “the property basic rate”, and
  • (b) in subsection (3), for “BRT”, in both places, substitute “PBRT”.

FA 2012

54

In section 102 of FA 2012 (I - E profit: policyholders’ rate of tax), in subsection (3), for “the basic rate” substitute “the savings basic rate”.

Part 3 — Amendment of Scotland Act 1998

Scotland Act 1998

55

In section 80C of the Scotland Act 1998 (power to set Scottish rates for Scottish taxpayers), for subsection (2B) (which prevents a Scottish rate resolution from applying different rates in relation to different types of income) substitute—

(2B) If income tax is charged at Scottish rates on the non-savings income of a Scottish taxpayer for a tax year (within the meaning of section 11A of the Income Tax Act 2007), those rates are treated for income tax purposes as if they were— (a) Scottish rates for all non-savings income other than property income which are set for the tax year at the same rates as the Scottish rates, and (b) separate Scottish rates for property income which are set for the tax year at the same rates as the Scottish rates, but, subject to that, a Scottish rate resolution may not provide for different rates to apply in relation to different types of income.

Schedule 2 — Scottish and Welsh property income rates

Part 1 — Scotland

1

In section 80C of the Scotland Act 1998 (power to set Scottish rates for Scottish taxpayers), for subsection (2B) (which prevents a Scottish rate resolution from applying different rates in relation to different types of income), as substituted by paragraph 55 of Schedule 1, substitute—

(2B) A Scottish rate resolution— (a) may provide for the rates applicable in relation to property income to be different from the rates applicable in relation to other income, but (b) may not provide for different rates to apply in relation to different types of other income. (2BA) But Scottish rates applicable in relation to property income must set the same limits or make the same other provision enabling those rates to be ascertained as are set or made in relation to rates applicable in relation to income other than property income.

Part 2 — Wales

Amendments of ITA 2007

2

In section 6B (the Welsh rates), in subsection (1A), as inserted by paragraph 3 of Schedule 1, for Step 3 substitute—

  • Step 3Add the Welsh rate (if any) set by Senedd Cymru for that year for the purpose of calculating the Welsh property basic rate, the Welsh property higher rate or the Welsh property additional rate (as the case may be).

Amendments of Government of Wales Act 2006

3

Chapter 2 of Part 4A of the Government of Wales Act 2006 (income tax) is amended as follows.

4
  • (1) Section 116D (power to set Welsh rates for Welsh taxpayers) is amended as follows.

(d) a Welsh rate for the purpose of calculating the Welsh property basic rate; (e) a Welsh rate for the purpose of calculating the Welsh property higher rate; (f) a Welsh rate for the purpose of calculating the Welsh property additional rate.

  • (a) after “additional rates” insert “and the Welsh property basic, higher and additional rates,”, and
  • (b) for “section 11B” substitute “sections 11B and 11CB”.
5
  • (1) Section 116I (supplemental powers to modify enactments) is amended as follows.
  • (a) in the opening words, for the words from “section 11B” to “additional rates)” substitute “sections 11B and 11CB of the Income Tax Act 2007 (income charged at Welsh rates)”, and

(2A) The Treasury may by order modify any enactment not contained in Chapter 2 of Part 2 of the Income Tax Act 2007 (rates at which income tax is charged) so that it makes provision, in relation to a Welsh taxpayer, by reference to the Welsh property basic rate, the Welsh property higher rate or the Welsh property additional rate, instead of the property basic rate, the property higher rate or the property additional rate.

  • (4) In subsection (3)(a), after “additional rate” insert “or, as the case may be, the Welsh property basic rate, the Welsh property higher rate or the Welsh property additional rate”.
6

In section 116K (report by the Comptroller and Auditor General), in subsection (3)(b), at end insert “or relating to the Welsh property basic rate, the Welsh property higher rate or the Welsh property additional rate”.

Schedule 3 — Non-resident, and previously non-domiciled individuals

Part 1 — Relief for new residents on foreign income and gains

Reliefs only deductible against income or gains to which they relate

1

(3A) But a deduction for that purpose is to be made only from qualifying foreign income.

(4A) But a deduction for that purpose is to be made only from qualifying foreign employment income.

  • (3) In section 25 of ITA 2007 (reliefs and allowances deductible at Steps 2 and 3: supplementary), in subsection (3), at the appropriate places insert—
  • section 41P of ITEPA 2003 (qualifying foreign employment income)
  • section 845A of ITTOIA 2005 (qualifying foreign income)
  • (a) for “chargeable” substitute “qualifying foreign”, and
  • (b) after “individual” insert “in that tax year”.
  • (5) The amendments made by this paragraph have effect for the tax year 2025-26 and subsequent tax years.

QAHCs

2
  • (a) in item 23—
  • (i) for “paragraph 46” substitute “paragraph 46(4) to (6)”,
  • (ii) after “arising” insert “to an individual who provided investment management services in connection with investment arrangements to which a QAHC is party”, and
  • (iii) for “a QAHC (within the meaning of that Schedule)” substitute “the QAHC as a result of an interest the individual acquired during the course of the provision of those services”, and
  • (b) after the row containing item 23 insert—
“QAHC” and “investment management services” have the meanings they have in that Schedule.
  • (a) in the definition of “qualifying QAHC gain”—
  • (i) after “accruing” insert “to an individual who provided investment management services in connection with investment arrangements to which a QAHC is party”, and
  • (ii) for the words from “a QAHC” to the end substitute “the QAHC that were acquired during the course of the provision of those services”, and
  • (b) at the end insert—
  • “QAHC” and “investment management services” have the meanings they have in that Schedule.
  • (4) This paragraph has effect in relation to income arising and gains accruing on or after the day on which this Act is passed.

Children under 10

3

In section 845B of ITTOIA 2005 (meaning of “qualifying new resident”), in subsection (1)—

  • (a) omit the “and” after paragraph (b), and
  • (b) after paragraph (c) insert

, and (d) the individual is at least 10 years old at the commencement of that tax year.

Residence of personal representatives

4
  • (1) In section 62 of TCGA 1992 (death: general provisions), in subsection (3) (residence of personal representatives), omit “or a long-term UK resident within the meaning of IHTA 1984”.
  • (2) The amendment made by this paragraph is to be treated as having come into force on 6 April 2025 and has effect where the deceased person died on or after that date.

Foreign gains treated as accruing when remitted to UK

5
  • (2) Paragraph 2 of Schedule 9 to FA 2025 has effect, and is to be treated as always having had effect, with the amendment made by this paragraph (and the amendment made by that paragraph has effect accordingly).

Capital gains tax: amendments connected with end of remittance basis

6
  • (1) In section 8C of TMA 1970 (returns so far as relating to capital gains tax)—
  • (a) in subsection (1), in paragraph (a), the words from “does not” to the end become sub-paragraph (i) of that paragraph,
  • (b) after that sub-paragraph insert

or (ii) where the person is not entitled to the annual exempt amount for the tax year, is nil,

  • (c) omit subsection (1)(c) (but not the “and” following it),
  • (d) in subsection (2), for “to (c)” substitute “and (b)”, and
  • (e) omit subsection (4).
  • (2) In section 1K of TCGA 1992 (annual exempt amount), omit subsection (6)(a).
  • (3) The amendments made by this paragraph have effect for the tax year 2025-26 and subsequent tax years.

Definitions

7
  • (1) In section 989 of ITA 2007, at the appropriate place insert—
  • “foreign gain claim” means a claim under paragraph 1 of Schedule D1 to TCGA 1992,
  • (2) In Schedule 4 to ITA 2007, at the appropriate places insert—
foreign employment election section 989 (and see section 41M of ITEPA 2003)
foreign gain claim section 989 (and see paragraph 1 of Schedule D1 to TCGA 1992)
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foreign income claim section 989 (and see section 845A of ITTOIA 2005)
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qualifying new resident section 989 (and see section 845B of ITTOIA 2005)
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  • (3) In Part 2 of Schedule 4 to ITTOIA 2005, at the appropriate places insert—
foreign employment election section 989 of ITA 2007 (and see section 41M of ITEPA 2003)
foreign gain claim section 989 of ITA 2007 (and see paragraph 1 of Schedule D1 to TCGA 1992)
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foreign income claim section 989 of ITA 2007 (and see section 845A of this Act)
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qualifying new resident section 989 of ITA 2007 (and see section 845B of this Act)
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  • (4) In Part 2 of Schedule 1 to ITEPA 2003, at the appropriate places insert—
foreign employment election section 989 of ITA 2007 (and see section 41M of this Act)
qualifying new resident section 989 of ITA 2007 (and see section 845B of ITTOIA 2005)
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Part 2 — Temporary repatriation facility

Introduction

8

Schedule 10 to FA 2025 (temporary repatriation facility) is amended as follows.

Deemed income under section 732 of ITA 2007

9

In paragraph 7—

(1A) For the purposes of applying those paragraphs for the purposes of sub-paragraph (1)(c)— (a) those paragraphs have effect as if— (i) for sub-paragraph (1)(a) (in each paragraph) there were substituted— (a) an individual is treated as having an amount of income for any of the tax years 2025-26, 2026-27 or 2027-28 as a result of section 732 of ITA 2007 (individuals receiving a benefit as a result of relevant transactions), (ii) the reference in sub-paragraph (2) (in each paragraph) to “the payment” were to the benefit by reference to which the income is treated as arising, (iii) sub-paragraph (3)(b)(ii) (in each paragraph) were omitted, and (iv) the references in each paragraph, and in section 87A of TCGA 1992 as applied by those paragraphs, to “capital payments” were to benefits falling within sub-paragraph (1)(c) of this paragraph, and (b) those paragraphs are to be applied after they have been applied for the purposes of determining whether any amount of a capital payment is qualifying overseas capital.

, and

  • (b) in sub-paragraph (2), after “amount”, in the first place it occurs, insert “of income”.

Value of amounts of qualifying overseas capital

10

In paragraph 8 (designation of qualifying overseas capital), after sub-paragraph (2) insert—

(2A) For the purposes of designating an amount of qualifying overseas capital of an individual that— (a) is qualifying overseas capital as a result of paragraph 2(2) or (5), or (b) is treated as qualifying overseas capital as a result of paragraph 6(1)(b), the value of that amount is the value of the amount when it first arose to the individual.

Designation where tax paid from other sources

11

In paragraph 8, after sub-paragraph (4) insert—

(4A) But where— (a) an amount of relevant foreign tax has been paid, or will be paid, in respect of an amount of qualifying overseas capital (“the related qualifying overseas capital”), and (b) it has been, or will be, paid out of funds other than the related qualifying overseas capital, sub-paragraph (3) does not apply to the related qualifying overseas capital to the extent that the tax has been, or will be, paid out of those funds.

Income tax or capital gains tax reduction where TRF charge paid on same amount

12

In paragraph 8, after sub-paragraph (6) insert—

(6A) Sub-paragraph (6B) applies where— (a) an amount (“the TRF amount”) is treated as designated qualifying overseas capital of an individual as a result of sub-paragraph (6), (b) on or after 6 April 2025, an officer of Revenue and Customs, in relation to the tax year 2024-25 or an earlier tax year— (i) amends the individual’s self-assessment while an enquiry under section 9A of TMA 1970 (enquiry into return) into the individual’s return for that tax year is in progress, (ii) issues a partial or final closure notice under section 28A of that Act (completion of enquiry) in relation to that return, or (iii) makes an assessment under section 29 of that Act, and (c) the effect of the officer taking that step is that income tax or capital gains tax is charged in respect of the TRF amount. (6B) The amount of income tax or capital gains tax due and payable under section 59B of TMA 1970 in respect of the TRF amount is to be treated as reduced (but not below nil) by the amount of the TRF charge paid in respect of the TRF amount. (6C) Where sub-paragraph (6B) applies, the individual may not amend the return in which the designation election relating to the TRF amount was included to alter or revoke that election (if the return otherwise could have been amended) so as to cause the TRF amount not to be designated.

Capital payment derived from foreign income or gains

13
  • (ii) in that paragraph, after “capital” insert “that is designated on the basis that it is qualifying overseas capital as a result of a remittance provision”, and

, or (b) an amount of income treated as qualifying overseas capital under paragraph 6 that— (i) falls within sub-paragraph (1)(b) of that paragraph, and (ii) is designated on the basis that it is qualifying overseas capital as a result of a remittance provision.

, and

  • (b) in sub-paragraph (2), after “paragraph 6” insert “, and that falls within sub-paragraph (1)(a) or (c) of that paragraph,”.
  • (2) In paragraph 12(1) (capital gains tax: main exemption), after “capital” insert “that is designated on the basis that it is qualifying overseas capital as a result of a remittance provision (other than paragraph 6(1)(b))”.

(aa) for each amount designated, whether or not it is designated on the basis it is qualifying overseas capital as a result of a remittance provision, and

  • (iii) in paragraph (b), after “designated” insert “on that basis”,

(2B) In this Part and in Part 2 “remittance provision” means paragraph 2(2) or (5) or paragraph 6(1)(b). (2C) Where— (a) an amount is designated on the basis it is qualifying overseas capital as a result of a remittance provision, and (b) the amount would (ignoring this sub-paragraph) also be regarded as designated under paragraph 3 or 5 (matched capital payments), it is not to be regarded as designated under that paragraph for the purposes of paragraph 10(7) (relief for offshore income gains) or paragraph 13 (relief for matched capital payments) as a result of that designation on that basis. (2D) Accordingly two designations of the amount are required to secure the benefit of all of the reliefs that may be available under paragraphs 10(1), 10(7),12(1) and 13— (a) one designation of the amount on the basis it is qualifying overseas capital as a result of a remittance provision, and (b) another not on that basis.

, and

(5A) Where the individual considers that an amount designated under sub-paragraph (5) could, if it were qualifying overseas capital, be designated on the basis that it is qualifying overseas capital as a result of a remittance provision, the individual may designate it on that basis.

Amounts derived from designated qualifying overseas capital

14

After paragraph 13 insert—

(13A) (1) This paragraph applies to an amount (“amount A”) if— (a) either— (i) the remittance of the amount to the United Kingdom would have the effect mentioned in paragraph 2(3)(a) or (b) by reference to income or gains, or (ii) the remittance of the amount would result in income being treated as arising to a settlement in accordance with section 648(3) (and accordingly would result in an amount falling within paragraph 6(1)(b) arising), and (b) the remittance of an amount (“amount B”) of designated qualifying overseas capital to the United Kingdom would have one of the effects mentioned in paragraph (a)(i) or (ii) by reference to that same income or those same gains (“the reference income or gains”) if it had not been designated. (2) Where amount A falls within sub-paragraph (1)(a)(i), so much of amount A (so far as it relates to the reference income or gains) as does not exceed amount B (so far as it relates to the reference income or gains) is to be treated— (a) as designated qualifying overseas capital, and (b) as designated on the basis it is qualifying overseas capital as a result of a remittance provision. (3) Where amount A falls within sub-paragraph (1)(a)(ii), so much of the amount falling within paragraph 6(1)(b) as would result from the remittance of amount A as does not exceed amount B (so far as it relates to the reference income or gains) is to be treated— (a) as designated qualifying overseas capital, and (b) as designated on the basis it is qualifying overseas capital as a result of a remittance provision.

Effect on section 65(5)(b) IHTA charge etc

15

After paragraph 13A (as inserted by paragraph 14 of this Schedule) insert—

(13B) (1) The effects of Parts 1 and 2 of this Schedule are to be ignored for the purposes of section 65(5)(b) of IHTA 1984 (and accordingly will not prevent any amount being regarded as income of a person for the purposes of income tax for the purposes of that section). (2) Where— (a) the trustees of a settlement make a capital payment to an individual, (b) the making of that payment results in the individual having qualifying overseas capital, (c) that qualifying overseas capital is designated, so much of the deemed disposal under section 71 of TCGA 1992 arising on the making of the payment as reflects the designated qualifying overseas capital is (despite sub-paragraph (1)) treated as a chargeable transfer within the meaning of IHTA 1984 for the purposes only of section 260(2)(a) of TCGA 1992 (gifts on which inheritance tax is chargeable etc).

Amendment of returns

16

In paragraph 9 (payment of the TRF charge through the income tax system), after sub-paragraph (7) insert—

(8) Paragraph 8(6) is not to be taken as preventing the amendment of a return so as to alter or revoke a designation of qualifying overseas capital made in that return, provided that amendment is made in accordance with section 9ZA of TMA 1970 (taxpayer permitted to amend return within 12 months of filing date).

Transfers from mixed funds

17

In section 809Q of ITA 2007, in subsection (9)—

  • (i) for “that Part of that Schedule” substitute “Part 1 of Schedule 10 to FA 2025”, and
  • (ii) after “8(7)” insert “of that Schedule”.

Commencement of this Part

18
  • (1) Schedule 10 to FA 2025 has effect, and is to be deemed always to have had effect, with the amendments made by paragraphs 9 to 16 of this Schedule.

Part 3 — Temporary non-residence

19

(6A) Where— (a) a company (“company A”) makes a payment (including by way of a loan) to the individual in the temporary period of non-residence, (b) the individual is, at a relevant time, a material participator in, or is an associate of a material participator in, another company that is a close company (“company B”), (c) at the time the payment is made, company B controls (within the meaning of sections 450 and 451 of CTA 2010) company A, and (d) it is reasonable to suppose that the making of that payment is intended to avoid an amount being received by the individual by way of relevant distribution made, or treated as made, by company B, company A is to be treated as making a relevant distribution of that amount to the individual in that period. (6B) Where— (a) a company makes a payment (including by way of a loan) to any person other than the individual at any time in the temporary period of non-residence, (b) if the company had made a dividend to the individual at that time, it would have been a relevant distribution, and (c) the individual receives an amount or a benefit (“the relevant receipt”) as a result of arrangements that it is reasonable to suppose are intended to secure that— (i) the individual receives the benefit of the payment or any part of it, but (ii) without a relevant distribution having been made, or treated as made, to the individual in that period, the company is to be treated as making a relevant distribution to the individual in that period in the amount of the value of the relevant receipt. (6C) For the purposes of subsection (6B)(c) “arrangements” include any agreement, understanding, scheme, transaction or series of transactions (whether or not legally enforceable).

(6D) Where tax of a similar character to income tax is payable by the individual under the law of a territory outside the United Kingdom on a relevant distribution— (a) credit for any such tax paid by the individual is to be allowed against income tax chargeable in respect of the relevant distribution, and (b) the credit is to be given effect by treating the amount of the relevant distribution as reduced to such amount as would secure that so much of the credit is given as does not exceed the income tax chargeable in respect of the relevant distribution.

  • (5) In subsection (12) omit the definition of “trade profits of the close company”.
20

(4A) Where— (a) a company (“company A”) makes a payment (including by way of a loan) to the individual in the temporary period of non-residence, (b) the individual is, at a relevant time, a material participator in, or an associate of a material participator in, another company (“company B”) that would be a close company if it were UK resident, (c) at the time the payment was made, company B controls (within the meaning of sections 450 and 451 of CTA 2010) company A, and (d) it is reasonable to suppose that the making of that payment is intended to avoid— (i) an amount being received by the individual by way of dividend that falls within subsection (3)(c), or (ii) the individual becoming entitled to such a dividend, the individual is to be treated as having received, at that time, a dividend in that amount that falls within subsection (3)(b) and (c). (4B) Where— (a) a company makes a payment (including by way of a loan) to any person other than the individual in the temporary period of non-residence, (b) if the company had made a dividend to the individual at that time, it would have been a dividend within subsection (3), and (c) the individual receives an amount or a benefit (“the relevant receipt”) as a result of arrangements that it is reasonable to suppose are intended to secure that— (i) the individual receives the benefit of the payment or any part of it, but (ii) without the individual receiving, or becoming entitled to, a dividend that falls within subsection (3)(c), the individual is to be treated as having received, in that period, a dividend in the amount of the value of the relevant receipt, that falls within subsection (3)(b) and (c). (4C) For the purposes of subsection (4B)(c) “arrangements” include any agreement, understanding, scheme, transaction or series of transactions (whether or not legally enforceable).

(4D) Where tax of a similar character to income tax is payable by the individual under the law of a territory outside the United Kingdom on a dividend within subsection (3)— (a) credit for any such tax paid by the individual is to be allowed against income tax chargeable in respect of the dividend, and (b) the credit is to be given effect by treating the amount of the dividend as reduced to such amount as would secure that so much of the credit is given as does not exceed the income tax chargeable in respect of the dividend.

(10) In this section— (a) “associate” and “participator” have the same meanings as in Part 10 of CTA 2010 (see sections 448 and 454), (b) a “material participator” is a participator who has a material interest in the company, as defined in section 457 of that Act, (c) “relevant time” means— (i) any time in the year of departure or, if the year of departure is a split year as respects the individual, the UK part of that year, or (ii) any time in one or more of the 3 tax years preceding that year.

21

(6A) Where— (a) a company (“company A”) makes a payment (including by way of a loan) to the individual in the temporary period of non-residence, (b) the individual is, at a relevant time, a material participator in, or is an associate of a material participator in, another company that is a close company (“company B”), (c) at the time the payment was made, company B controls (within the meaning of sections 450 and 451 of CTA 2010) company A, and (d) it is reasonable to suppose that the making of that payment is intended to avoid an amount of relevant stock dividend income being treated under this Chapter as arising to the individual in that period, relevant stock dividend income in that amount is treated as arising to the individual in that period. (6B) Where— (a) a company makes a payment (including by way of a loan) to any person other than the individual at any time in the temporary period of non-residence, (b) if the company had issued share capital in lieu of a cash dividend shares at that time that the individual is beneficially entitled to, relevant stock dividend income would have been treated under this Chapter as arising to the individual in that period, and (c) the individual receives an amount or a benefit (“the relevant receipt”) as a result of arrangements that it is reasonable to suppose are intended to secure that— (i) the individual receives the benefit of the payment or any part of it, but (ii) without relevant stock dividend income in that amount being treated under this Chapter as arising to the individual in that period, relevant stock dividend income in amount of the value of the relevant receipt is treated as arising to the individual in that period. (6C) For the purposes of subsection (6B)(c) “arrangements” include any agreement, understanding, scheme, transaction or series of transactions (whether or not legally enforceable).

(6D) Where tax of a similar character to income tax is payable by the individual under the law of a territory outside the United Kingdom on relevant stock dividend income— (a) credit for any such tax paid by the individual is to be allowed against income tax chargeable in respect of the relevant stock dividend income, and (b) the credit is to be given effect by treating the amount of the relevant stock dividend income as reduced to such amount as would secure that so much of the credit is given as does not exceed the income tax chargeable in respect of the relevant stock dividend income.

  • (5) In subsection (11) omit the definition of “trade profits of the close company”.
22

(4A) Where— (a) a company (“company A”) makes a payment (including by way of a loan) to the individual in the non-resident year, (b) the individual is, at a relevant time, a material participator in, or is an associate of a material participator in, another company that is a close company (“company B”), (c) at the time the payment was made, company B controls (within the meaning of sections 450 and 451 of CTA 2010) company A, and (d) it is reasonable to suppose that the making of that payment is intended to avoid the amount of the payment being included in the individual’s income for the non-resident year as relevant investment income, the amount of the payment is to be treated as relevant investment income of the individual for the non-resident year. (4B) Where— (a) a company makes a payment (including by way of a loan) to any person other than the individual at any time in the non-resident year, (b) if the company had made a dividend to the individual at that time, it would be relevant investment income of the individual, and (c) the individual receives an amount or a benefit (“the relevant receipt”) as a result of arrangements that it is reasonable to suppose are intended to secure that— (i) the individual receives the benefit of the payment or any part of it, but (ii) without the amount being included in the individual’s income for the non-resident year as relevant investment income, the amount of the value of the relevant receipt is to be treated as relevant investment income of the individual for the non-resident year. (4C) For the purposes of subsection (4B)(c) “arrangements” include any agreement, understanding, scheme, transaction or series of transactions (whether or not legally enforceable).

(4D) Where tax of a similar character to income tax is payable by the individual under the law of a territory outside the United Kingdom on relevant investment income— (a) credit for any such tax paid by the individual is to be allowed against income tax chargeable in respect of the relevant investment income, and (b) the credit is to be given effect by treating the amount of the relevant investment income as reduced to such amount as would secure that so much of the credit is given as does not exceed the income tax chargeable in respect of the relevant investment income.

  • (6) In subsection (11) omit the definition of “trade profits of the distributing company”.
23
  • (1) The amendments made by paragraphs 19(2), 20(2), (3) and (6), 21(2) and 22(2) have effect for the tax year 2026-27 and subsequent tax years in relation to payments made by companies, whenever made.
  • (2) The amendments made by paragraphs 19(3) to (5), 20(4) to (5), 21(3) to (5) and 22(3) to (6) have effect for the tax year 2026-27 and subsequent tax years in relation to—
  • (a) dividends, or other distributions, whenever made,
  • (b) relevant stock dividend income, whenever it is treated as having arose, and
  • (c) relevant investment income, whenever it arose.

Schedule 4 — PAYE for treaty non-residents etc

Part 1 — Treaty non-residents

Introduction

1

ITEPA 2003 is amended as follows.

Notifications in respect of treaty non-resident employees

2
  • (1) Section 690D (employer notification for qualifying new residents) is amended as follows.
  • (2) At the end of the heading insert “or treaty non-residents”.
  • (a) in paragraph (a), for “qualifying”, in the second place it occurs, substitute “notifiable”;
  • (b) in paragraph (b), for “qualifying” substitute “notifiable”.
  • (4) After subsection (1) insert—

(1A) This section also applies in relation to an employee if— (a) the employee is or is likely to be a treaty non-resident at any time in a tax year (“the notifiable year”), and (b) the employee works or is likely to work outside the UK during the notifiable year.

  • (a) in the opening words—
  • (i) for “The” substitute “If this section applies in relation to the employee by virtue of subsection (1), the”;
  • (ii) for “qualifying” substitute “notifiable”;
  • (b) at the end of paragraph (b) insert “(but see subsections (5A) and (5B))”.
  • (6) After subsection (2) insert—

(2A) If this section applies in relation to the employee by virtue of subsection (1A), the appropriate person may give a notice to an officer of Revenue and Customs at any time during the notifiable year— (a) that the employer is proposing to treat the treaty relieved proportion of any treaty affected payment made by the employer to the employee as not being PAYE income of the employee for the purposes of PAYE regulations, and (b) specifying that proportion (but see subsections (5A) and (5B)).

(c) a “treaty affected payment” means a payment of, or on account of, an amount of employment income of the employee a proportion in respect of which UK tax is likely to be relieved under double taxation arrangements as a result of the employee being treaty non-resident in the notifiable year; (d) the “treaty relieved proportion” is the best estimate that can reasonably be made of the overall proportion of the amount of all treaty affected payments made by the employer to the employee in respect of which UK tax is likely to be relieved under double taxation arrangements.

  • (8) In subsection (4), after “qualifying payment” insert “or treaty affected payment (as applicable)”.
  • (9) After subsection (5) insert—

(5A) Subsection (5B) applies for the purposes of determining the proportion to be specified in a notice or notices under this section in circumstances where, if the notice or notices were to be given and acknowledged by an officer of Revenue and Customs, a notice given under both subsection (2) and subsection (2A) would have effect in relation to the employee and the notifiable year. (5B) The proportion specified in the notice or notices must produce the result that no amount is reflected in both— (a) the foreign proportion specified in the notice under subsection (2) as an amount that is likely to be qualifying foreign employment income, and (b) the treaty relieved proportion specified in the notice under subsection (2A) as an amount in respect of which UK tax is likely to be relieved under double taxation arrangements.

  • (a) after “qualifying new residents” insert “or treaty non-residents”;
  • (b) for “qualifying year” substitute “notifiable year”.
  • (a) in paragraph (a), for “qualifying” substitute “notifiable”;
  • (b) for paragraph (b) substitute—

(b) a subsequent notice— (i) is given by the appropriate person in relation to the employee and the notifiable year under the same subsection, and (ii) is acknowledged by an officer of Revenue and Customs, (c) the appropriate person notifies (in writing or otherwise) an officer of Revenue and Customs that the notice is to cease to have effect, or

(c) an individual is “treaty non-resident” at any time if, at that time, the individual falls to be regarded as resident in a territory outside the UK for the purposes of double relief arrangements having effect at the time, and (d) “double taxation arrangements” means arrangements that have effect under section 2(1) of TIOPA 2010.

Consequential amendments

3

In section 690B (direction by HMRC in relation to internationally mobile employees), in subsection (6), in paragraph (b)(i)—

  • (a) after “new resident”, in the first place it occurs, insert “or treaty non-resident”;
  • (b) after “mobile tax year” insert “or treaty non-resident at any time in the mobile tax year”.
4
  • (1) Section 690E (direction by HMRC in relation to qualifying new residents) is amended as follows.
  • (2) At the end of the heading insert “or treaty non-residents”.
  • (4) In subsections (2)(a) and (4)(b), after “qualifying payment” insert “or treaty affected payment (as applicable)”.

Part 2 — Other amendments of ITEPA 2003

5

ITEPA 2003 is amended as follows.

6
  • (1) Section 690 (internationally mobile employees) is amended as follows.
  • (2) In subsection (3), after “entire” insert “uncertain”.
  • (3) In subsection (4), in the opening words—
  • (a) after “a payment” insert “or part of a payment”;
  • (b) for “to the extent that” substitute “in respect of which”.
  • (4) In subsection (4)(a), after “the income” insert “relating to that payment or part”.
7
  • (1) Section 690A (employer notification for internationally mobile employees) is amended as follows.
  • (2) In subsection (2)(a) for “a proportion of any uncertain payment” substitute “the non-PAYE proportion of any mobile payment”.

(2A) For the purposes of this section and section 690B— (a) “mobile payment” means a payment of, or on account of, an amount of employment income of the employee in respect of which— (i) the extent to which the income is PAYE income depends or may depend on the extent to which the employee’s duties during the mobile tax year are performed in the United Kingdom, and (ii) the reason it depends or may depend on that extent is connected to the employee being or having been internationally mobile in the mobile tax year; (b) “non-PAYE proportion” means the best estimate that can reasonably be made of the overall proportion of the amount of all mobile payments made by the employer to the employee that would not be PAYE income if the employee were non-UK resident for the mobile tax year or the mobile tax year were a split year as respects the employee (as appropriate).

  • (5) For subsection (4) substitute—

(4) But subsection (3) does not apply to a mobile payment— (a) to the extent that section 690D(4) or 690E(4) (qualifying payments or treaty affected payments) also applies to the payment, or (b) if the payment is made after the end of the mobile tax year, other than to the extent the payment is also an uncertain payment.

(aa) as a result of a change in the employee’s circumstances, the proportion specified in the notice ceases to be a reasonable estimate of the non-PAYE proportion,

  • (b) in paragraph (b) after “this section” insert “in relation to the employee and the mobile tax year”;
  • (c) for paragraph (c) substitute—

(c) section 690D (qualifying new resident or treaty non-resident employee) begins to apply in relation to the employee and the mobile tax year and the mobile tax year is not likely to be a split year as respects the employee.

8
  • (1) In section 690D (employer notification for qualifying new residents)—
  • (i) for the words from “the proportion” to the end substitute

— (i) the best estimate that can reasonably be made of the overall proportion of the amount of all qualifying payments made by the employer to the employee that is likely to be qualifying foreign employment income,

or (ii) if the best estimate mentioned in sub-paragraph (i) is greater than 30%, 30%.

(aa) as a result of a change in the employee’s circumstances, the proportion specified in the notice ceases to be a reasonable estimate of the overall proportion of the amount (as applicable) of— (i) all qualifying payments that is likely to be qualifying foreign employment income, or (ii) all treaty affected payments in respect of which UK tax is likely to be relieved under double taxation arrangements,

  • (2) The amendment made by sub-paragraph (1)(a)(ii) does not apply to a notification relating to an employee and tax year 2026-27 or 2027-28 if section 41R of ITEPA 2003 (limit on relief) would not apply to a foreign employment relief claim made by the employee for that year, if that year was the qualifying year (see paragraph 7 of Schedule 8 to FA 2025 (limit on relief not to apply to certain foreign employment relief claims)).
9
  • (1) In section 690B (direction by HMRC in relation to internationally mobile employees)—
  • (b) in subsection (2), in paragraph (a), for the words from “a proportion” to the end substitute “the non-PAYE proportion, or”;
  • (c) in subsection (2), in paragraph (b) for “such” substitute “uncertain”;
  • (d) in subsection (4), in paragraph (b) after “uncertain payment” insert “or mobile payment (as applicable)”;
  • (e) after subsection (4) insert—

(4A) But a direction for determining the non-PAYE proportion does not apply in relation to a mobile payment— (a) to the extent that section 690D(4) or 690E(4) (qualifying payments or treaty affected payments) also applies to the payment, or (b) if the payment is made after the end of the mobile tax year, other than to the extent the payment is also an uncertain payment.

10

In section 690C (employees who were internationally mobile etc. before 2025-26), in subsection (2)(b) for “spilt” substitute “split”.

Schedule 5 — Unassessed transfer pricing profits

Assessment of transfer pricing profits that should have been included in a return

1
  • (1) In TIOPA 2010, after Part 4 insert—

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