She said: “Our relatively favourable tax status for foreign capital has mitigated some of the negative perceptions that investors have of the UK’s attractiveness as a place to do business, and removing this sits somewhere between odd and totally incoherent.”
Real Estate UK estimated that six sovereign wealth funds – from Norway, Singapore, China, Abu Dhabi, Kuwait and Qatar – own £31bn of property across the UK.
Andrew Teacher, founding partner at property consultancy Lauder Teacher Associates, said: “The UK needs investment to build homes and infrastructure, yet the Treasury is proposing to bring certain UK property income and gains earned directly by foreign sovereigns into tax.
“The proposed REIT route and exemptions soften the impact, but add complexity and uncertainty for investors. At a time when we need long-term international capital to build homes and infrastructure, this is precisely the kind of uncertainty businesses have warned against.
“One of the main reasons we see record-low housebuilding is investor sentiment towards the country. This proposal risks adding further fuel to the perception that Britain does not want foreign investment.”
A Treasury spokesperson said the UK maintained a “competitive offer” for sovereign investors and that the modernisation of tax policy would create a “more certain, transparent and sustainable regime, to support valuable long-term investment in the UK”.
The government’s consultation on the proposals closes on 20 January 2027.
Last week’s Autumn Budget also hiked tax on sole-trader domestic landlords, with a 2% rise in tax on property income from April 2027. It means the rates for small landlords now range from a basic rate of 24% to an additional rate of 49%.
However, there were no changes for UK corporate landlords, which pay corporation tax on their rental income at 25%.
