Chancellor launches consultation to reduce tax burden on wealthy US expats

Chancellor, Rachel Reeves, has launched a consultation into easing the tax burden faced by wealthy US investors looking to relocate to the UK.

The aim of the consultation is to remove a barrier which stops top-earning Americans from moving to the UK, and in turn, attract wealthy individuals to the country.

The Treasury stated that the government is committed to ensuring that the UK continues to be a place where "individuals choose to live, work and invest". In the 2025 Budget, it set out its commitment to further developing its tax offer for "talented globally mobile individuals".

However, there are concerns about the high effective tax rates that can arise when there is inconsistency in how tax systems of different jurisdictions view the tax status of certain entity types. Therefore, the government has said it is “committed” to removing this barrier to relocating into the UK.

As a result, it is looking to introduce legislation to allow UK residential individual members in specific eligible reverse hybrids to treat their holdings on a transparent basis for the purposes of income tax and capital gains tax.

The objective would be to charge individual members to UK tax on underlying profits, income and gains of a foreign entity that matches the tax treatment in the relevant foreign jurisdiction.

Individuals would not be chargeable to income tax on distributions from the entity, which would give them more certainty over their UK tax and the extent to which double taxation relief would be available.

No equivalent legislation would be introduced for UK resident corporates.

A part of the consultation, a summary of questions has been submitted by the Treasury to which respondents can answer ahead of the 31 July deadline.

Utmost senior relationship manager, Mark Jephcott, has praised the move by the government, but believes that more can be done to attract wealthy individuals to the UK.

He concluded: "Any measure that removes barriers preventing top-earning Americans from moving to Britain is naturally welcome, especially as there is great interest among wealthy US nationals to seek a home in the UK.

"However, for the government to truly capitalise on this interest and attract wealthy US individuals, it needs to offer a more competitive tax regime alongside this, which plays a central role in relocation decisions.

"This is particularly important as the UK’s appeal among internationally mobile wealthy individuals has weakened following the abolition of the non-dom regime in the Autumn 2024 Budget, along with the ever-expanding scope of IHT, particularly the application of IHT to businesses and pensions."

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