NON-RESIDENT DIVIDEND TAX CREDIT ABOLISHED: WHAT IT MEANS FROM APRIL 2026
December 2, 2025
Understanding the 2026 Rule Change for Non-Resident UK Dividend Income
Introduction
One of the less widely trailed but practically important changes in the 2025 Budget affects non-UK residents who receive dividends from UK companies. The government has announced that, from 6 April 2026, the “notional dividend tax credit” that non-resident individuals (and certain trusts) currently enjoy will be abolished. In effect, this removes a longstanding anomaly, and in many cases increases the UK tax burden on UK-source dividends for non-residents. If you or your clients are non-UK resident but receive UK dividend income (or consider doing so), this change is likely to matter.
What’s changing - abolition of the non-resident dividend tax credit
Under current law (section 399 of the Income Tax (Trading and Other Income) Act 2005), non-UK residents receiving dividends from UK companies, when they also have UK rental or UK partnership income, can elect to have all their UK income assessed, claim the personal allowance, and treat the UK dividends as having a notional tax credit at the ordinary rate.
From 6 April 2026:
- That notional dividend tax credit is abolished. The relevant legislative reference (s.399) will be repealed, and consequential amendments made to related legislation (Income Tax Act 2007, TMA 1970, etc.).
- Non-UK residents receiving UK dividends will therefore no longer get the “credit” for the notion of tax paid on those dividends. This aligns their treatment with UK residents, under the broader dividend tax regime.
- The change applies to dividends paid (or treated as paid) on or after 6 April 2026. According to the government, this measure affects a small number of individuals, fewer than 1,000 non-UK resident non-domiciled taxpayers a year (for those also receiving UK rental or partnership income).
Who is likely to be affected
This change primarily impacts:
- Non-UK resident individuals receiving dividends from UK companies (particularly if they also have UK rental or partnership income).
- Non-UK resident trusts, life-interest trusts or other entities that previously benefited from the notional credit, receiving UK dividend income.
- Advisers and trustees arranging distributions to non-resident beneficiaries who expect the “old” credit.
In short, while this change affects a relatively small population compared with mainstream resident taxpayers, it removes a valuable dividend-credit benefit for a niche but often sophisticated group of non-resident investors or beneficiaries.
Planning & Practical Implications - What Non-Resident Investors Should Do
For non-resident individuals, trustees, and advisers receiving or expecting UK dividend income, the following practical actions should be considered:
- Re-assess dividend-income forecasts for 2026/27 and beyond: previously, the notional credit reduced net tax; now, dividends will be taxed without credit, likely increasing UK tax liability.
- Review structures and beneficiaries: where offshore trusts or non-resident beneficiaries were used to benefit from the credit, consider whether alternative planning (e.g. use of UK pension wrappers, or different ownership locations) makes sense.
- Adjust timing of dividend distributions if possible: if dividends are due near the 6 April 2026 cut off, it may be worth considering accelerating to before that date (though the benefit may be marginal and the window narrow).
- Assess whether the UK personal allowance utilises any benefit: but bear in mind that, for non-residents with only dividend income, allowance usage may be limited.
- Update tax-reporting and modelling for UK rental/partnership income: since dividend credit abolition may affect the overall UK tax position for non-resident individuals with mixed UK-source income (dividends + rental/partnership).
Conclusion
The abolition of the non-resident dividend tax credit from 6 April 2026 removes a longstanding quirk in UK dividend taxation, but makes life harder, tax-wise, for non-UK resident individuals and trusts receiving UK dividends. While the number of people affected is small, for those in scope the change is real and material. As always, if you, or your clients, have UK-source dividends and live or are resident outside the UK, it would be prudent to review dividend-planning strategies and assess the impact under the new rules.
Feel free to get in touch via our contact page at Mosaic Chambers if you’d like to run through specific cases or modelling scenarios.
Introduction More wealthy UK residents are exploring life overseas ahead of the 2026/27 tax year. Higher UK taxes, political uncertainty and a desire for a different way of living are all pushing people to look at alternatives. Four destinations stand out for high-net-worth UK individuals as at late 2025: 1. United Arab Emirates (Dubai) 2. Portugal 3. Switzerland 4. Malta Each offers a different blend of tax advantages, residency options and lifestyle. United Arab Emirates (Dubai) - Dubai is now the default choice for many UK entrepreneurs and professionals. Tax For individuals, there is currently no personal income tax on salaries, bonuses or most investment income, and no local capital gains or inheritance tax regime for individuals. There is VAT and a developing corporate tax regime, but personal tax remains far lighter than in the UK. The UK–UAE double tax treaty helps reduce the risk of the same income being taxed twice and needs to be considered alongside UK residence rules. Residency Common routes for UK nationals include: Employer- or company-sponsored residence visas Remote-worker visas for those employed or self-employed abroad Long-term “golden” style visas linked to investment, property or professional status Retirement options for over-55s. (All require private health insurance and periodic renewal.) Lifestyle Dubai offers a high standard of living, excellent connectivity and a large, well-established British community. Housing and schooling are expensive and the lifestyle can encourage overspending, but for many the tax position and opportunity outweigh the costs. Best for: Maximising net income and building or scaling a business in a dynamic, international city. Portugal - Portugal appeals to those who want EU residency, a milder climate and a slower pace of life. Tax The old NHR regime has closed to new applicants and been replaced by a newer incentive framework (often referred to as IFICI) aimed at certain professionals and activities. The UK–Portugal tax treaty reduces double taxation, and Portugal does not operate a classic wealth tax, though property-related charges can apply. (It's signed and ratified but not yet fully in force as of early 2026, which may slightly affect immediate tax planning). Residency Post-Brexit, common routes for UK nationals include: D7 visa – for those with sufficient passive income (pensions, investments, rentals). D8 / Digital Nomad visa – for remote workers with qualifying income from abroad. Work and other residence visas tied to employment or specific skills. These can lead to long-term residence and, ultimately, citizenship if physical presence and integration tests are met. Lifestyle Cost of living is generally below the UK (though higher in central Lisbon and the Algarve), English is widely spoken in cities, and the public and private healthcare systems are well regarded. There are large British and wider international communities. Best for: Those wanting EU residence, good quality of life and a balance of tax and lifestyle advantages. Switzerland - Switzerland attracts UK families who prioritise security, discretion and top-tier services. Tax Tax is set at federal, cantonal and communal level, so overall rates vary widely by canton. Well-chosen cantons can be very competitive for both individuals and companies. Private capital gains are not generally taxed, but there is an annual wealth tax on net assets, with rules depending on location. For suitable non-working individuals, some cantons still offer lump-sum (forfait) taxation, where tax is based on living costs rather than worldwide income, subject to minimum levels and conditions. Residency As non-EU nationals, UK citizens use: B permits – time-limited residence, often linked to work L permits – short-term residence for specific assignments C permits – longer-term settlement after sustained residence and integration Wealthy retirees and non-working individuals may be able to obtain residence based on financial self-sufficiency and, in some cantons, lump-sum taxation. Lifestyle High costs are offset by excellent infrastructure, schools and healthcare (with compulsory private health insurance). International communities are strong in Zurich, Geneva and other cities, though social life can feel more formal than Southern Europe. Best for: Those seeking stability, discretion and first-class public services and education, rather than the lowest day-to-day costs. Malta - Malta is a compact EU state with a very familiar feel for UK nationals: English is an official language and the legal and business environment is comfortable for British professionals. Tax Malta’s tax system and UK–Malta treaty can be particularly attractive where you hold significant foreign-source income. Under the Global Residence Programme, qualifying individuals can pay a favourable flat rate on foreign income remitted to Malta, while foreign capital gains kept offshore are generally not taxed in Malta. There is no separate wealth tax and no classic inheritance tax, though duties may apply to certain Maltese assets. The separate “golden passport” (citizenship by investment) route has been struck down by the EU’s top court, but residence programmes remain available. Residency Options for UK citizens include: Employer-sponsored Single Permits combining work and residence The Global Residence Programme for financially self-sufficient individuals meeting property and minimum tax thresholds Digital-nomad-style visas for remote workers Long-term residence after several years of compliant stay Lifestyle Costs (especially rent and property) are typically lower than in the UK outside the most fashionable areas. English is widely used in government and business, healthcare is solid, and London is only a short flight away. Best for: Those wanting an English-speaking EU base with favourable treatment of foreign-source income and a tight-knit expat community. How to decide & next steps - All four countries can work extremely well for UK high-net-worth individuals, but for different profiles: Choose Dubai if your priority is low personal tax on active income and you are comfortable with a high-energy city. Choose Portugal if EU residency, climate and lifestyle matter as much as tax. Choose Switzerland if stability, education and healthcare are at the top of your list. Choose Malta if you want an English-speaking EU base with flexible options for foreign income. The right answer depends on your overall wealth, income mix, family plans and how tied you remain to the UK. If you would like bespoke, confidential advice on whether remaining UK-resident or relocating to Dubai, Portugal, Switzerland or Malta is the better strategy for your situation, you are welcome to get in touch to explore your options in detail.
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