The UK-India Free Trade Agreement

Home
Knowledge
The UK-India Free Trade Agreement

The UK-India Free Trade Agreement

{154018B5-B57D-4528-9FE4-A99E6E587114}

May 8, 2025

After 15 rounds of negotiations (which began in January 2022), the UK and India agreed a trade deal on 6 May 2025, with promising headlines on tariff reductions, services and access to Indian procurement for UK businesses. Parallel talks on a bilateral investment treaty are still ongoing. The trade agreement will need to be ratified by both countries and is unlikely to be implemented before 2026.

The UK government described the agreement as a "huge economic win" expected to add £4.8 billion a year to the UK economy by 2040 and "the biggest and most economically significant bilateral trade deal the UK has done since leaving the EU, and the best deal India has ever agreed". EU negotiations on a free trade agreement with India continue. In February 2025, a joint statement from EU Commission President Ursula von der Leyen and Indian Prime Minister Narendra Modi set out the aim of concluding negotiations by the end of 2025.

Drawing on UK and Indian press announcements and a summary of conclusions from the UK, here is what we know so far:

What has been included?

Reduction of tariffs on UK exports to India

India has agreed to cut its tariffs on 90% of tariff lines for UK exports, with 64% tariff-free immediately and 85% becoming fully tariff-free within a decade. Headlines include a reduction of tariffs on UK whisky and gin from 150% to 75%, reducing to 40% after 10 years. Tariffs on UK automotives will drop from more than 100% to 10% (subject to a quota and starting with internal combustion engine cars only).

Other sectors noted as benefiting from Indian tariff reductions are cosmetics, aerospace (with reduced tariffs on UK exports of advanced manufacturing such as aircraft parts and scientific and technical measuring instruments), lamb, medical devices, salmon, electrical machinery, soft drinks, chocolate and biscuits.

Reduction of tariffs on Indian exports to the UK

The UK has likewise committed to major tariff reductions, citing clothes, footwear and food products, including frozen prawns, as goods due to benefit from lower tariffs. Tariffs will be eliminated on 99% of Indian goods.

Professional and business services

The UK states that UK services sectors will benefit from "market certainty" when trading into India, with guaranteed access for financial and professional business services sectors. Changes to Indian foreign investment restrictions in its insurance sector will "ensur[e] that UK financial services companies are treated equally to domestic suppliers".¹

On recognition of professional qualifications, the UK and India will identify and encourage mutually interested UK and Indian relevant bodies to negotiate mutual arrangements for recognition of professional qualifications. A professional services working group for UK and Indian government officials will provide a forum to monitor and support this initiative.

Digital services

Barriers to digital trade will be reduced, with specific provisions around recognition of electronic contracts, preventing forced transfer of source code, and cross-border data flows and data localisation. Provisions to make consumers safer online include minimisation of commercial and spam messages.

Indian procurement

UK businesses are expected to benefit from access to India's procurement market, covering goods, services and construction. The UK government has estimated the value of the newly-accessible tenders as at least £38 billion per year. This is expected to bring particular opportunities for the UK clean energy sector, transport, healthcare and life sciences. Preferential treatment for businesses that manufacture or produce in India will be extended to companies with at least 20% of their product or service from the UK.

Copyright protections in India

Copyright protections for the creative sector have been reinforced, with a commitment from India that works exported there will continue to be protected for at least 60 years. India will also review its own copyright and procurement terms.

Addressing non-tariff barriers to trade

A chapter on customs and trade facilitation will aim to ensure that customs procedures in both countries are non-discriminatory, transparent and consistent. This will include simplification of certain customs procedures for eligible traders, use of electronic rather than paper documents, and publication of customs laws and procedures online in English where possible. The FTA also provides for reaffirmation and enhancement of sanitary and phytosanitary (SPS) standards, and bespoke support mechanisms for SMEs, including the establishment of designated points of contact.

In a welcome development for traders, the UK and India have also agreed to release goods as rapidly as possible after arrival at customs, endeavouring to do so within 48 hours if all requirements have been met and where no physical examination is necessary.

Rules of origin and trade remedies

A new chapter on rules of origin is expected to facilitate improved access to the Indian market, in particular for complex products with ingredients and materials partly sourced from other countries. The trade remedies provisions in the FTA will include a temporary "bilateral safeguard" mechanism allowing either country to temporarily increase tariffs, or suspend concessions, if the tariff liberalisation agreed in the FTA leads to a surge of imports that causes or threatens to cause serious injury to domestic industry.

Commitments on core values

Chapters on anti-corruption, consumer protections, labour rights, gender and development are included in the FTA, in a first for Indian trade deals. The UK has also stressed that it has upheld animal welfare commitments and high food standards.

Double Contribution Convention and business mobility

An agreement signed alongside the FTA has granted a three-year exemption from national insurance contributions for Indian employees temporarily working in the UK. They and their employers will instead be expected to continue contributing to social security schemes run by the Employees' Provident Fund Organisation in India. There are reciprocal provisions for UK employees in India. This has attracted significant press attention in the UK and accusations of "two-tier" taxation – this could become a political obstacle to UK ratification of the FTA.

Separately, the FTA aims to facilitate professional mobility between the UK and India, ensuring transparent visa processes and enabling professionals across sectors such as engineering, architecture, accountancy and consultancy to attend conferences, transfer within organisations and supply contracted services without undue barriers.

What has not been included?

Legal services

The UK-India FTA has been agreed without reference to legal services. The Law Society of England and Wales immediately criticised this omission as a missed opportunity. India still restricts the ability of foreign lawyers to form an establishment in the country.

Major changes to UK visa regime

Worker mobility was understood to be a sticking point in negotiations, with India aiming for higher quotas for categories of professionals, including IT workers. While we do not yet have the full details of the FTA, the UK government has emphasised that changes to visa numbers will be minor.

Exemption from CBAM

The Carbon Border Adjustment Mechanism (CBAM)² is a tax on carbon-intensive imports, implemented to aid low carbon transition and avoid carbon leakage. India sought an exemption from the UK's upcoming CBAM on the grounds that it is a developing country. Indian trade minister Piyush Goyal argued that this tax could harm manufacturing and reduce UK competitiveness, as well as add costs for importers. This issue has not been dealt with in the FTA and bilateral discussions will continue.

Dentons' global trade practice advises firms across the globe on international trade matters, including the operation of FTAs. For more detailed advice in relation to this FTA, please get in touch with any of the contacts named below or your usual Dentons contact.