Americans living and working in the UK may face increased tax rates due to the results of the UK general election and the US presidential election in November.
“For the Americans, this is the warm-up period before the main event of the US elections in November,” said Alex Street, a partner at Blake Rothenberg, a British audit, tax and business advisory firm, and a spokesman for the firm’s international group.
“Labour’s historic landslide victory has given it a mandate to implement a long-term tax strategy. While its election manifesto pledges to keep income tax, national insurance, VAT and corporation tax unchanged, the changes to the non-resident tax rate introduced by the previous Conservative government and retained by Labour will significantly impact many Americans in the UK. Historically, the non-resident tax system has allowed many Americans in the UK to avoid tax liabilities on their non-UK income and gains. This will no longer be the case in the future. In addition, Labour has not committed to capital gains tax rates. Currently, the UK’s headline capital gains tax rate is comparable to the US rate, but any increases or changes, particularly to carried interest, would raise the global effective tax rate for Americans in the UK,” he explained.
“To balance the books without significant tax increases, growth is essential. We hope this will be reflected in any proposed tax policy given the healthy Labour majority. The UK has long been a popular destination for Americans to live and work. However, while the UK has a strong majority in government, a similar outcome in the US is less likely this November. This year of elections and change is seeing the first piece of the puzzle fit into place. We should gain more clarity with the UK’s first budget due in September. However, the US election is expected to be much closer, bringing more uncertainty about the future US tax landscape and its implications for Americans in the UK,” Street continued.