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29 October 2026
On 28 October 2026, as part of the 2026 Budget, the UK government published a consultation on modernising the taxation of foreign sovereign investments and confirmed that, from 1 January 2029, the current non-codified sovereign immunity from direct tax will be replaced by a new statutory sovereign tax status.
As a result, sovereigns (including foreign sovereign states, heads of state acting in their sovereign capacity, sovereign wealth funds and others) will become taxable on income and gains from UK real estate and on UK trading income. Key exemptions will remain, and a bespoke Real Estate Investment Trust (REIT) route will be introduced. Further details are set out below.
Tetyana Zhuravska, Senior Associate, has contributed to this legal update.