UK to Tax Sovereign Funds on Property From 2029
Foreign governments and sovereign wealth funds that own British property face a major change to their tax treatment. Under proposals published alongside the Budget on 28 October 2026, their UK property income and gains would become taxable from 1 January 2029, ending a long-standing exemption.
The plan replaces the current non-codified sovereign immunity from direct tax with a new statutory “sovereign tax status”, putting the taxation of sovereign investors on a legal footing for the first time.
What would become taxable
Under the consultation, income from UK real estate, including rents, and gains on disposals would fall within UK tax, whether property is held directly or through certain indirect structures. Qualifying interest and ordinary dividends would remain exempt, as would the profits of investment offices managing a sovereign’s own portfolio. Sovereign investors would instead gain bespoke access to the UK Real Estate Investment Trust regime, with a 15% rate on property income distributions when holding through a UK company. The Treasury expects the reforms to raise £690 million in 2029/30.
Still proposals, not yet law
Nothing changes immediately. The Treasury consultation closes on 20 January 2027, and legislation is expected in a later Finance Bill. Sovereign investors who currently benefit from immunity would need to apply to HM Revenue and Customs for the new status. The final shape of the regime could still shift as responses come in, so investors and advisers will be watching the draft legislation closely.
