Americans in the UK must be ready for the changing UK and US tax landscapes
Americans in the UK must be ready to act on the changing landscapes of UK and US taxes due to the abolition of the UK’s non-dom regime and uncertainty around the US Estate Tax and its expiring exemption, say leading audit, tax and business advisory firm, Blick Rothenberg.
John Havard, a US/UK private client consultant at the firm, said: “Rachel Reeves is going ahead with abolishing the non-dom regime in April 2025. At the same time, a change to Estate Tax from the first Trump Administration, the Estate and Gift Tax Exempt Amount, which is presently $13.6m, will expire in December 2025. Although Donald Trump will likely seek to make the current level of exemption permanent, extend it or even abolish Estate Tax altogether.”
He added: “But what does all this mean to a US citizen living in the UK in light of the non-dom abolition set out in Rachel Reeves’ recent Budget?”
John said: “Americans who have not been here long enough to qualify as long-term residents (LTR) under the new UK Inheritance Tax (IHT) rules, who then leave the UK permanently before becoming LTR, would benefit from either an extension of the current US Estate Tax exemption or abolition of that tax, as IHT would then only be relevant to their UK sited assets.”
He added: “As US Estate & Gift Taxes are integrated, a reversion to the old, lower, exemption might give them cause to think about taking advantage of the present rule and gift assets in 2025, the value of which would be outside the lower exemption amount in 2026.”
John said: “US citizens living in the UK who will be LTR under the new UK rules need to start thinking about how UK and US taxes interact. If they were close to hitting the threshold for deemed domicile under the ‘old’ UK rules, then that thinking should have been done before the Budget. Otherwise, they may find themselves scrambling to prepare for a changing tax landscape.”
He added: “However, if they were deemed domiciled under the ‘old’ rules, the extension of the current Estate Tax exemption or its abolition will have little impact on them if the plan is to continue living in the UK for the foreseeable future. The prospect of IHT on world-wide assets should be their primary focus for the time being.”
John said: “There is no one-size-fits-all approach to this situation, especially as we do not know if the Estate Tax will have its current exemption extended, made permanent or be abolished all together. It is strongly recommended that US citizens who are long-term residents of the UK get professional advice to understand their own position. That is particularly important for any US citizen whose spouse is not also a US citizen.”
He added: “At the very least, US citizens who are long-term residents of the UK should be reviewing their wills to ensure that the provisions and wishes expressed are fit for purpose in the two-tax regime which will apply at death. Which will almost certainly not be the case if a will was made while still living in the USA and has not been reviewed since.”
