The Global Tax Landscape in 2025

The tax differences between countries will continue to be center stage in 2025 as the shake-out from 2024 plays out and the opportunities and risks brought to the forefront by election upheavals are addressed. More and more relocating high- and ultra-high-net-worth individuals will appreciate the benefits of begin able to move to lower tax jurisdictions owing to investment migration programs.

Setting up a Plan B — the unintended fallout from the elections

An unprecedented number of elections took place around the world in 2024 and the repercussions of the results will be felt for years to come. In many cases, changes in governments or policies introduced by incoming regimes have led to the wealthy and the not-so-wealthy reviewing their relationship with their homeland — and potentially voting with their feet.

Polarization in some countries means that those uncomfortable with incoming leaders are assessing their options. Being able to move elsewhere at short notice is of significant value. While many investment migration Plan Bs aren’t designed to be acted on, the security of having such a plan is invaluable, and, advance planning is critical to avoid being caught off-guard due to longer than anticipated application processes.

UK tax changes and the impact of non-domicile reform

Incoming governments in places such as the UK that have been voted in to rectify underinvestment must raise revenues. That needs to come from those with the “broadest shoulders” as the government said. In many cases, concerns about how bad the first budget was going to be were over-stated, but once individuals started examining their options, plans to move were swiftly put in place. Even if it the first Labour budget was not as bad as expected, not all taxpayers are convinced that the changes represent the final position, despite government’s statements that there are no plans — or was that no current plans? — to increase taxes again.

Changes to the two-centuries-old non-domicile regime announced by the previous UK government in March 2024 effective from April 2025 are already being felt by the record exodus from the country of foreign nationals who have been living there for a long time — closely followed by UK nationals worried about domestic changes to tax rates.

Tax considerations in relocation planning

Moving to a new jurisdiction always creates tax questions. Not only do the tax rates differ and apply at different thresholds, but unexpected taxes such as wealth tax (applicable in only a handful of countries) may be levied, or gifts may be taxable in country B when they weren’t in country A. So, careful upfront consideration of what needs to be done in advance of a move, or afterwards, is crucial to ensure that income does not unnecessarily fall into a tax net.

Something as simple as moving abroad before selling a business rather than selling the business then retiring on the proceeds can have a huge impact on the tax cost. And the ability to work remotely during that final ownership period means that non-residence can be obtained earlier in the process, protecting the gain from being taxed more than necessary.

No two cases are the same, and no two countries are quite alike overall. But in the past year we have seen a major shift from tax being a consideration in residence planning, to residence being a consideration in tax planning.

Once a taxpayer is concerned about their taxes rising and looks at residence options, the idea of living somewhere sunnier with a more relaxed pace of life can quickly gather momentum. If that leads to a tax saving, all the better. If the taxes don’t ultimately rise, the sun-kissed beach is still there and holds its own allure.

US tax changes: Expiring cuts and citizenship taxation

Sometimes a tax increase isn’t the result of a rise, but just the expiry of a reduction. For budgetary projection purposes, the 2017 Tax Cuts and Jobs Act in the USA was set to expire in 2025. The re-election of the president who introduced the act may lead to it being extended or replaced by a similar slate. But without legislation, those taxes will go back up.

For US nationals, escaping Uncle Sam’s tax net is more difficult than for citizens of almost any other comparable country, as the USA is the only major country to tax on the basis of citizenship rather than residence. Most US citizens abroad may not in practice pay much additional US tax once the combination of the Foreign Earned Income Exclusion and a foreign Tax Credit for the taxes paid in the country of source or residence are factored into the US tax return.

On the campaign trail it was suggested that this may change and US nationals resident abroad may not need to top up their taxes to the USA. However, the legislative pathway to getting that accepted into law is complex and may not be politically deliverable.