On 6 May 2025, the United Kingdom and India signed a Free Trade Agreement (FTA). Sir Keir Starmer hailed it as the UK’s “biggest trade deal” since Brexit and the “most ambitious” agreement in India’s history. His counterpart, Narendra Modi, said the trade deal was a “landmark”.
The agreement will trigger a boom in annual trade between the world’s fifth- and sixth-largest economies by £25.5 billion over 15 years, according to the UK government. It will also boost the UK economy by £4.8 billion annually over the same period.
Expanded Overview of the Agreement
This FTA is the UK’s most comprehensive bilateral trade deal since leaving the EU while India called it the most ambitious trade pact it has ever signed. The core of the deal was a big cut in tariffs on goods and services. It also covers market access, digital trade, mobility of professionals, investment promotion and more.
Key Highlights of the Agreement
Tariff Reductions on Goods
- Alcohol and Spirits:
- Tariffs on British whisky and gin exports to India will be cut in half from 150% to 75% immediately and further reduced to 40% over 10 years.
- This is expected to increase Scotch whisky exports by £1 billion over the next five years, supporting an estimated 1,200 jobs across the UK, particularly in Scotland.
- Automotive Sector:
- Tariffs on UK-made cars exported to India, currently above 100%, will be gradually trimmed to 10% under a tariff-rate quota system.
- This will benefit British car manufacturers, including electric vehicle producers and luxury brands.
- Other Goods:
- UK exports such as cosmetics, electrical machinery, aerospace components, salmon, biscuits and medical devices will benefit from reduced or eliminated tariffs, improving price competitiveness in the Indian market.
Services and Digital Trade
- The agreement includes modern provisions for digital trade, such as:
- Recognition of electronic contracts and signatures
- Commitments to not impose data localisation requirements
- Enhanced protection of source code and encryption
- This will be particularly beneficial for UK-based IT, financial, legal, consulting and education service providers, giving them easier access to India’s growing services market.
Professional Mobility and Social Security
- A key feature of the FTA is the Social Security Protocol, which:
- Exempts Indian nationals temporarily working in the UK (and vice versa) from dual social security contributions for up to 3 years.
- This will lower employment costs for businesses posting workers overseas and facilitate skilled labour mobility.
Government Procurement and Investment
- UK businesses will gain access to Indian public procurement markets—including at the central and state levels—allowing them to bid for infrastructure, energy and development contracts.
- The FTA also covers:
- Provisions to facilitate cross-border investment
- Protections for UK investors under fair and equitable treatment clauses
- Commitments to create a transparent, predictable investment environment
Consumer and Business Benefits
- UK Consumers will benefit from:
- Lower prices on Indian imports such as tea, spices, textiles, jewellery and automobile components
- Wider variety of products on supermarket shelves
- UK Businesses will gain:
- Preferential market access to one of the world’s fastest-growing economies
- Reduced red tape and clearer rules on customs, intellectual property and dispute resolution
Strategic and Economic Significance
- India is projected to become the third-largest economy globally by 2030.
- This deal strengthens the UK's positioning in the Indo-Pacific region, in line with its wider trade and geopolitical strategy.
- It enhances cooperation in technology, innovation, environmental sustainability and climate change—opening doors to long-term collaborations between industries and governments.
What This Means for UK Tax and Accounting Professionals
As accountants and tax advisors, we believe UK businesses must now:
- Revisit their India strategies and assess the export or outsourcing potential in light of reduced tariffs and better legal certainty.
- Consider the tax implications of cross-border services, withholding tax changes and social security exemptions under the new agreement.
- Engage in due diligence and review their transfer pricing arrangements, cross-border structures and permanent establishment risks.
- For Indian companies operating or investing in the UK, the FTA will provide more clarity around corporation tax, capital gains exemptions and access to government tenders.
Conclusion
The UK-India FTA is an important step forward in deepening economic ties between the two major economies. It opens up tangible opportunities for trade in goods and services, and also lays the groundwork for long-term collaboration.
At UK Property Accountants, we are ready to help businesses and individuals take advantage of this new trade landscape. If you are planning to export, invest, or expand your business under the agreement, feel free to contact us for advice tailored to your needs.
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