Kiwis & Aussies: 2025 UK Tax Overhaul

1. Introduction

The start of a new UK tax year is always a bit of a mixed bag. On the one hand, it’s a fresh chance to tidy up your finances and get organised. On the other, it usually means HMRC have popped in a few previously announced changes that you might have forgotten about. April 2025, however, isn’t bringing us your usual minor tweaks – if things feel a bit up in the air right now, you’re not imagining it – HMRC really got busy.

When I first arrived in the UK armed with not much more than a backpack and an astonishingly naïve understanding of UK tax, I figured: “How complicated could it really be?” After my first attempt at submitting a UK tax return—complete with staring blankly at forms that made about as much sense as debating if the pavlova really did come from New Zealand—I quickly discovered the answer was “very.” Fortunately, we’ve spent the following two decades becoming a bit of an expert in UK tax quirks—saving other expats from similar confusion in the process.

If you’re a Kiwi or Aussie contracting or freelancing here in the UK (or soon planning to be), this blog is for you. Significant tax changes are set to roll out in April 2025, impacting everything from how your rental income back home is taxed, to how inheritance tax might apply to you, and even what happens to that handy little £2000 exemption you’ve possibly grown quite fond of.

2. Key April 2025 Tax Changes at a Glance

Before we roll up our sleeves and break down the details, let’s quickly pinpoint the headline tax changes coming into effect from April 2025. For anyone contracting, freelancing, or simply enjoying life as a Kiwi or Aussie in the UK, these are the four big shifts that you genuinely need to know about:

Removal of the £2,000 Foreign-Income Exemption

If you’ve enjoyed previously ignoring small bits of income sitting quietly back in Australia or NZ, sadly those days are behind you. The handy £2,000 threshold, beneath which non-doms didn’t have to report or pay tax on unremitted foreign income, disappears entirely from April 2025. All overseas income—however small—will now have to be reported (and potentially taxed) on your annual UK tax return.

End of Non-Domiciled (Non-Dom) Tax Advantages (Residence-Based Taxation)

For many years, Non-Domiciled (“non-dom”) status provided a significant UK tax advantage for many Kiwis and Aussies living here. If your foreign income exceeded £2,000, you could use what’s called the “remittance basis”. Under this option, you wouldn’t pay any UK tax on overseas income so long as you didn’t bring it into the UK—but choosing this meant losing your annual UK personal allowance and Capital Gains Tax allowance. For taxpayers with significant overseas income, or who were high earners in the UK with little or no personal allowance anyway, the remittance basis was often a smart choice.

The “non-dom” tax concept itself stretches back further than most people realise. It was originally introduced in 1799 as a temporary measure to fund Britain’s war against Napoleon, helping protect the foreign fortunes of wealthy aristocrats fleeing Revolutionary Europe. More than two centuries later, this “temporary” arrangement is finally being laid to rest by HMRC—a huge policy shift in the UK tax landscape.

From April 2025, this beneficial status is ending entirely. The UK is shifting fully to residence-based taxation, meaning domicile no longer matters—every UK resident will pay UK tax on their worldwide income.

Introduction of the New Foreign Income and Gains (FIG) Regime

But wait, there’s more. The government is introducing a new FIG regime, offering a four-year exemption for certain newly arrived tax residents who haven’t lived in the UK for at least the previous ten tax years. In theory, under FIG, you might not have to pay UK tax on certain foreign income—although you’ll lose your UK personal tax allowance. It’s not as much of a gift as it seems for a lot of people, so we’ll unpack this carefully in the sections below.

Residence-Based Inheritance Tax (IHT) Reform

Just when you’d gotten comfy with UK inheritance tax rules (or successfully ignored them!), everything’s changing. From April 2025 onwards, if you’ve been a UK tax resident in at least 10 of the past 20 tax years, your worldwide estate—including those assets tucked away in NZ or Oz—becomes liable to UK inheritance tax charges. This is a big surprise for many expats, so planning is key.

Also, the new IHT rules might follow you home, making you liable still to UK IHT on your worldwide assets even if you have been permanently settled in NZ or Australia for several years. Its not a great rule change.

3. All Foreign Income Now Taxable in the UK

If there’s one gem that Kiwis and Aussies in the UK have quietly appreciated over the last few years (or un-wittingly used without even knowing it), it’s probably been the £2,000 foreign income exemption. Under the previous non-dom rules, you could safely ignore small amounts of overseas income without having to report them to HMRC or face UK tax—so long as the income stayed outside the UK and didn’t exceed £2,000 in total.

Unfortunately, from April 2025, HMRC is removing this exemption altogether. Yep—that’s right: every single dollar from abroad will count as UK income, and you have to report it. Whether it’s rental profits, small dividends, or even just a tiny bit of overseas interest you’ve been earning on that long-forgotten Aussie or Kiwi savings account, you’ll now need to declare it on your UK tax return each year.

Our the past three months we have provided hundreds of hours of free tax advice to UK-based Kiwis and Australians about this – at a guess, around 80% don’t know about this requirement.

For many Kiwis and Aussies with casual income back home—like a property rental that’s been ‘ticking along’ largely ignored—this necessitates a significant mindset shift. Even if the income amounts seem trivial, the reporting obligations definitely aren’t.

📌 Example Scenario (Sophie from Sydney):

Pre-April 2025 Sophie, an Aussie who’s been contracting in London for a few years, owns a small rental flat back home in Bondi, Sydney. Her Australian rental income brings in around £1,800 each year after expenses. Because this sits comfortably below the £2,000 exemption, Sophie historically hasn’t needed to declare or pay UK tax on this income. Easy, breezy—no worries.

Post-April 2025 Under the new rules, Sophie must now declare her Bondi rental income on her annual UK Self-Assessment tax return. Although the income will still be taxable in Australia, Sophie must now report her Australian rental income clearly to HMRC. She will be able to use UK-Australia double taxation relief to reduce the overall UK tax bill (offsetting tax paid to the Australian Tax Office). But the days of conveniently ignoring this relatively small foreign income are officially over.

4. End of the Non-Dom Era – Why it Matters for Aussies and Kiwis

One of the biggest talking points in the UK’s April 2025 tax shake-up is the elimination of the longstanding “non-dom” tax benefits. Previously, holding a non-domiciled status provided a straightforward advantage to many expats in the UK, especially Kiwis and Aussies who arrived to work for a few years.

From April 2025, however, this landscape changes completely, deleting domicile from the tax code. Instead, the UK adopts a simplified residence-based system. What does that mean practically for you? It means that if you’re a UK tax resident (regardless of domicile), your global income—every penny, every dollar—becomes taxable in the UK. The previous flexibility, allowing you to keep offshore earnings clear of UK tax, is removed entirely.

For Aussies and Kiwis used to separating their offshore finances and income neatly, this marks a significant adjustment. From rental properties in Auckland or Perth, interest earned back home, through to dividends from Australia or New Zealand stocks and shares—everything must now be declared and taxed according to UK rules.

📌 Example Scenario (Tom from Wellington):

Pre-April 2025 Tom is a Kiwi IT professional who’s been living and contracting in the UK for the last five years, but he’s always retained strong financial ties to New Zealand—including a rental property back home in Wellington. Under the pre-2025 non-dom rules, Tom chose the remittance basis, meaning he didn’t pay UK tax on his Wellington rental income so long as that money remained in New Zealand.

Post-April 2025 With the end of the non-dom tax regime, from 6 April 2025, Tom must include his rental profits from Wellington in his UK tax returns, even if he doesn’t bring this income to the UK. His global income becomes fully visible to HMRC from day one under the new system. He can offset any New Zealand taxes already paid on this income, but if UK rates are higher, he will owe additional taxes. For Tom—and many like him—this will mean reviewing his entire financial set-up and possibly reshaping strategies on overseas funds and investments.

🚩 No Worries Accounting Tip:

“Still unclear about your UK residency status or how the new residence-based tax rules affect you personally? We’ve helped hundreds of Kiwis and Aussies navigate precisely this type of situation smoothly. Don’t stress—just ask!”

5. FIG Regime – A Welcome Break for New Arrivals?

Just when you thought it was all bad news, HMRC has thrown Kiwis and Aussies a small bone with their new Foreign Income and Gains (FIG) regime. From April 2025 onwards, new arrivals to the UK—individuals who have been non-UK resident for at least the previous ten consecutive tax years—can benefit from a four-year exemption on being taxed on their non-UK sourced income and gains.

On the surface, that sounds like a fantastic result: four full years without worrying about UK tax on your rental properties, investment income, or capital gains sitting offshore. Sounds good, right? But, you’ll give up your entire UK personal allowance during this FIG period (currently £12,570 per tax year). This means that everything earned in the UK essentially becomes taxable from your first pound of UK income, potentially hiking up your UK tax bill.

For some new arrivals, particularly those with substantial offshore income or gains, or who are high earners in the UK, the FIG regime could prove attractive despite the lost personal allowance. But for others, it will cost far more than it ever saves. So you’ll need to think carefully—and ideally seek advice—before jumping in.

📌 Example Scenario (Emma, the Graphic Designer from Melbourne):

Emma’s situation (January 2026 arrival): Emma arrives from Melbourne in January 2026, setting herself up as a freelance graphic designer in London. Her main income comes from remote contracts for Australian clients, totalling around £38,000 per year. She also earns £6,000 annually from renting out her Melbourne flat.

Emma hasn’t lived in the UK in the past decade, so she’s eligible for the FIG regime—which would let her exclude her Australian rental income from UK tax for the first four years.

But here’s the catch: under FIG, Emma would lose out entirely on her UK personal allowance. If she claims FIG, she’ll start paying UK income tax on every pound earned from her freelance work immediately (no £12,570 tax-free allowance). Calculating the figures carefully, she realises she’ll be worse off—even taking into account the exemption on her Aussie rental income.

However, if Emma’s Australian rental income was substantially higher—say, £35,000 or more—the case for using the FIG exemption would be significantly stronger.

🚩 No Worries Accounting Tip:

“The FIG regime isn’t a no-brainer. Losing your UK personal allowance can often cost you more than the benefit you receive. Before making a decision, let’s crunch the numbers together carefully to avoid rude awakenings and costly mistakes.”

6. UK Inheritance Tax – The New 2025 Rules

If you’re like most Australians and Kiwis who’ve come to the UK, inheritance tax (IHT) likely wasn’t on your list of top concerns when you first landed at Heathrow. After all, neither Australia nor New Zealand has anything comparable. However, the UK’s shift in tax rules from April 2025 to a residence-based inheritance tax system means it’s time to give the topic some serious thought.

Currently, if you’re classified as a non-UK-domiciled individual, UK inheritance tax usually only applies to your UK-based assets. From April 2025 onwards, this all changes significantly. Under the updated rules, if you’ve been UK tax resident for at least 10 out of the previous 20 years, HMRC will start considering all your worldwide assets when it comes to inheritance tax. That house you’ve got in Sydney, your Kiwisaver account, even your shares in that beach bach in the Coromandel—they all suddenly come firmly into HMRC’s sights.

In effect, this means the longer you’ve casually enjoyed life in the UK, the bigger your potential tax liability becomes. Even returning home to Australia or New Zealand won’t provide immediate relief: under a new “tail provision”, HMRC will continue applying UK IHT rules to your worldwide assets for up to a full decade after you’ve permanently left the UK.

It’s a tricky, easily overlooked trap for Aussies and Kiwis who originally planned to stay in the UK for a year or two—but ended up staying much longer.

📌 Example Scenario (David from Perth):

David moved from Perth to London about 12 years ago to start contracting. Initially thinking his stay would be brief, he’s grown to enjoy London life and is now firmly settled here. He owns a valuable house back in Perth worth approximately AUD $1.4 million (£670,000 GBP), alongside a small London apartment worth around £400,000.

Pre-April 2025: As a non-UK-domiciled UK resident, David’s house in Perth previously wouldn’t have faced UK inheritance tax exposure. Only UK-based assets would have been included.

Post-April 2025: Thanks to the new residence-based inheritance tax rules, from April 2025 onwards, David’s valuable Perth home fully enters the UK IHT net. If his worldwide estate now exceeds the UK’s IHT threshold (currently £325,000), significant UK inheritance tax of 40% could potentially apply—giving David’s family an unwelcome and costly surprise.

🚩 No Worries Accounting Tip:

“Inheritance tax planning isn’t something to leave until you’re close to retirement; given these new rules, it’s an issue to tackle proactively today. Avoid your valuable offshore assets unintentionally falling into the UK IHT trap by having a planning conversation with us sooner rather than later.”

8. Practical 2025-Ready Checklist for Kiwis and Aussies

With the major tax changes now clearly on your radar, it’s the perfect moment to run through a quick, actionable checklist designed specifically for Kiwis and Aussies in the UK. Getting these basics sorted now means fewer nasty surprises down the track. So here’s your straightforward six-step prep list for April 2025 and beyond:

✅ Check if the FIG regime is beneficial (or not?)

1. Do you qualify for FIG? (Remember: 10 years non-residence required.)
2. Crunch the numbers carefully to ensure FIG benefits outweigh losing your UK personal allowance.
3. Don’t automatically assume FIG is the right choice—get advice if you’re unsure.

✅ Review offshore investments and bank accounts

1. Identify exactly what overseas income you have currently (rental, dividends, interest).
2. Consider consolidating complicated or low-value offshore investments.
3. Arrange clear records to simplify ongoing reporting requirements.

✅ Clarify your UK tax residency status

1. Check where you stand using the Statutory Residence Test (SRT).
2. Understand plainly if you qualify as UK tax resident (key for future decisions).
3. Be prepared for residency-driven global-tax implications.

✅ Plan your asset structure considering Inheritance Tax rules

1. Review how long you’ve been in the UK (10-out-of-20-year rule).
2. Consider strategies like gifting, trusts, or estate planning to minimise exposure.
3. Remember the new tail-provision: UK IHT may still apply years after you leave.

✅ Consider tax-efficient UK saving opportunities (ISA, pensions)

1. Look into Individual Savings Accounts (ISAs), as they’re fully exempt from UK tax.
2. Consider pension contributions—also extremely tax-effective, particularly for contractors and freelancers. But if you are going to be heading back to NZ of Australia at some point in the future, check who your UK pension fund might get impacted.
3. Ensure you’re maximising these accessible UK savings tools each tax year.

It may seem like extra work right now—but a small amount of preparation today can save you huge amounts of stress, hassle and unnecessary tax down the road. Being proactive, organised and well-informed sets you up confidently, ensuring that come April 2025 and beyond, you really will have “no worries”.

9. Final Thoughts: No Stress, Just Prepare

Tax changes—particularly big ones like these—almost always feel daunting at first. I get it: as an Aussie or Kiwi over here, you’re already juggling plenty of things, from tricky client contracts and day rates, to sorting out your latest trip to Rome via the Cinque Terre. The last thing you need is a sudden tax overhaul thrown into the mix.

But here’s the good news: none of the changes we’ve discussed need to send you into a panic. The secret, as always, lies in solid preparation and having trusted expertise at your fingertips before changes kick in. By understanding what’s coming up and how it directly impacts you, you can make smart, proactive moves right now that’ll put you comfortably ahead of the curve.

If you’ve made it to this point in the article, you’ve already got a significant advantage—you’re well-informed. These kinds of practical, straightforward insights are exactly what we regularly provide to our accounting clients completely free of charge, to help them confidently face changes and plan proactively. So, if you’re freelancing or contracting here in the UK, and you’d like this kind of practical, down-to-earth tax advice on tap, get in touch. You’ll be amazed at how super-awesome we are 😊