UK immigration and settlement update

The UK Government has announced significant proposals that may affect long-term residence and tax planning for internationally mobile individuals and private clients.

No replacement for investor visa

The 2025 Budget did not introduce a new visa route to replace the closed Tier 1 (Investor) visa. Instead, existing pathways have been enhanced, including the Global Talent, Innovator Founder, and High Potential Individual routes, aimed at attracting skilled professionals and entrepreneurs.

Consultation on “Earned Settlement”

A consultation published on 20 November proposes increasing the standard residence requirement for settlement (Indefinite Leave to Remain/ILR) from five years to ten years, with certain cases extending up to twenty years. Settlement would be assessed against four pillars:

Suitability: Meeting strict good character requirements, with no criminal record or outstanding debts to the NHS, HMRC, or other government bodies.

Integration: Passing the Life in the UK test and demonstrating English language proficiency at a higher B2 level (equivalent to A-level standard).

Contribution: Proving a sustained economic contribution, with annual taxable earnings above £12,570 for a minimum of 3 to 5 years (the exact duration is subject to consultation).

Residence: Demonstrating lawful continuous residence.

Exemptions apply to family members of British citizens, family members and holders of British National (Overseas) status, EU Settlement Scheme holders, and individuals already settled.

Adjustments for high-net-worth individuals

For private wealth individuals and high earners, specific attributes can reduce the standard 10-year baseline qualifying period:

High taxable income: Earning a taxable income of £125,140 for 3 years immediately prior to application could reduce the settlement period by 7 years, resulting in a potential 3-year path to ILR.

Higher taxable income: Earning a taxable income of £50,270 for 3 years could reduce the period by 5 years, allowing settlement after 5 years.

Global Talent / Innovator Founder Routes: Individuals in these specific routes can still qualify for settlement after just 3 years of continuous residence in that category.

It has been stated that these income-related thresholds would not track future changes to the tax system.

Applicants cannot combine multiple reductions; only the single largest reduction factor will be applied.

Other adjustments and factors

The residency period can also be adjusted by other factors:

Public service: Working in specified public service roles (e.g., medical and teaching professionals) for five years could result in a 5-year reduction to the baseline, allowing settlement after 5 years.

Community work: Worked in the community (e.g. volunteering) could provide reduction of 3-5 years.

English language: Demonstrating English proficiency at CEFR Level C1 (higher than the mandatory B2) could provide a 1-year reduction.

Certain actions will have a negative effect, extending the baseline residency period:

Claiming public funds (benefits) for less than 12 months: 15 years.

Claiming public funds for more than 12 months: 20 years.

Arriving illegally or overstaying a visa by more than six months: up to 30 years.

Impact on dependants and transitional arrangements

A major proposed change is that adult dependants will generally have to meet the new mandatory requirements in their own right, and their path to settlement may no longer automatically align with the main applicant.

The consultation is considering transitional arrangements, meaning the new rules are expected to apply to almost two million migrants who arrived in the UK after 2021 and have not yet secured ILR.

Given the complexity and potential retrospective nature of these changes, seeking professional legal and tax advice is essential for planning future UK residency.

Financial and tax implications

High-net-worth individuals may need to demonstrate annual income of £125,140 for three consecutive years prior to applying for settlement and ensure no outstanding government debts.

The proposals interact with the UK’s four-year Foreign Income and Gains (FIG) regime, which offers favourable tax treatment during the initial period of UK residence. However, those qualifying for settlement under the proposed ten-year baseline may become subject to UK Inheritance Tax on worldwide assets.

Practical considerations

• A potential surge in settlement and citizenship applications may lead to processing delays.
• Dual nationality restrictions in certain jurisdictions should be reviewed before applying for British citizenship.
• Periods of illness and parental leave are not excluded from the proposed residence requirements.

Key actions

Review immigration status: Assess current visa category and long-term settlement plans in light of proposed changes.

Plan ahead for income requirements: Ensure income thresholds can be met and documented for future settlement applications.

Consider tax exposure: Evaluate the impact of extended residence on UK tax obligations, including Inheritance Tax on worldwide assets.

Monitor consultation outcomes: Stay informed on the progress of the “Earned Settlement” proposals and potential implementation timelines.

Seek professional advice: Engage with immigration and tax advisers to align residency strategy with wealth planning objectives.

How can we help you?

If you would like to discuss how these changes may affect your immigration status or tax planning, please get in touch to arrange a confidential consultation.