Oct 31, 2026 · 6 min · 7 segments
For decades, foreign governments investing in Britain paid almost no British tax on what they earned there. It rested on practice, not law. On 28 October the Treasury proposed a statutory "sovereign…
On Budget Day, the Treasury published a consultation with a dry title, Modernizing Taxation of Foreign Sovereign Investments.
Here's what it proposes.
From 1 January 2029, foreign states, sovereign wealth funds, and state pension funds would need a new sovereign tax status, granted by the tax authority.
And they'd pay tax on certain British property income.
and most would pay tax on property gains, much as other overseas companies do.
It's a consultation, not yet law.
Some things don't change.
Interest stays exempt.
Dividends stay untaxed.
In-house investment offices in the UK are protected, and state-run pension funds from abroad keep an exemption on their gains.
There's also a door.
Sovereigns get their own route into a real estate investment trust with a 15% rate on property income and gains.
Assets would be revalued at the start of 2029, so older gains aren't taxed.
Comments close on the 20th of January.
First, money.
A sovereign fund that owns a London office block outright would face a tax bill it never had.
Second, structure.
A 15% route through one vehicle could shape how sovereign property deals are built for years.
Third, precedent.
Governments need revenue.
Property can't move.
And now a G7 country has proposed writing sovereign immunity into law and narrowing it at the same time.
15% is well below the main corporate rate.
On Budget Day, the Treasury published a consultation with a dry title, Modernizing Taxation of Foreign Sovereign Investments.
Here's what it proposes.
From 1 January 2029, foreign states, sovereign wealth funds, and state pension funds would need a new sovereign tax status, granted by the tax authority.
And they'd pay tax on certain British property income.
and most would pay tax on property gains, much as other overseas companies do.
It's a consultation, not yet law.
Some things don't change.
Interest stays exempt.
Dividends stay untaxed.
In-house investment offices in the UK are protected, and state-run pension funds from abroad keep an exemption on their gains.
There's also a door.
Sovereigns get their own route into a real estate investment trust with a 15% rate on property income and gains.
Assets would be revalued at the start of 2029, so older gains aren't taxed.
Comments close on the 20th of January.
First, money.
A sovereign fund that owns a London office block outright would face a tax bill it never had.
Second, structure.
A 15% route through one vehicle could shape how sovereign property deals are built for years.
Third, precedent.
Governments need revenue.
Property can't move.
And now a G7 country has proposed writing sovereign immunity into law and narrowing it at the same time.
15% is well below the main corporate rate.
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