US/UK TAX PLANNING with ALEX JONES, Partner at London Tax Firm, RAWLINSON-HUNTER
https://youtu.be/UjgQRpfqJ-E
Thousands of Americans live and work in the UK and record numbers of them are applying for British citizenship. Planning for taxes for these folks has always been challenging, but in 2024, with the change in the non-DOM rules, it's gotten even more difficult. To help us understand what's happening here and to try to identify some of these issues is ALEX JONES. He's a partner at Rawlinson Hunter, the British tax firm. Enjoy.
Outline
00:00 Understanding UK Tax Law Changes for US Citizens07:00 Navigating Residency and Tax Implications11:49 Planning for Inheritance Tax and Trusts19:51 Pre-Immigration Tax Planning Strategies30:03 Managing Double Taxation and Tax Credits
https://open.spotify.com/episode/4Hmqaalhjk3NklfMCWNd4X?si=8e45eac2d2f247cc
Transcript of US/UK Tax Planning
Frazer Rice (00:04)
Well, we have certainly had a lot of news with British tax law changing. And for those of us here in America who may or may not be part of getting to Europe in a major way and in the UK in a more permanent way, maybe give us a little overview of ⁓ A, what happened, but more specifically, how the UK thinks of US citizens, which can take different forms.
Alex Jones (00:31)
Let's start with the back end of that question, how we regard Americans. So from a tax point of view, clearly what we're really saying is how do we regard Americans who are exposed to UK taxes? And typically that means Americans who are here. Like most countries in the world, the UK will tax people on UK sources of income.
If somebody has a trade or business operating in the United Kingdom, we're going to try and tax it whether they are here or not. But if the US individuals physically in the United Kingdom, then the UK is going to try and tax them in a number of different ways, which I'll talk about in a second.
The pause is really just to emphasize the fact that they're American. So a US citizen or US green card holder is going to be US worldwide taxable, whether they live in America or not. So America is going to look at everything everywhere in an American way in dollars in a calendar year. And at exactly the same moment in time, albeit in the UK we have a different tax year end. Our year end is a rather crazy 5th of April year end.
Exactly the same amount of time the UK is going to look at exactly that same person and say, hey, what are we going to tax? And so you're starting with the premise that both countries are fighting over who gets the tax first. And the first thing you have to do is look at the two sets of domestic legislation to see how to start, where the problems are, and then you start looking beyond that.
In principle, the UK is going to tax people who are resident in the UK on worldwide income. So anything everywhere under UK rules, UK fiscal year, in sterling, et cetera, et cetera. And somebody who's not resident in the UK on UK-CITUS connected income only. However, the UK has long had a regime which has been known as the domicile regime or the remittance basis regime, which has been pretty well known internationally where we said,
Look, if you don't originate from here, if you're a foreigner coming in for a period of time, could be indefinite, could be reasonably long, but not permanently, then we won't necessarily tax all things which are non-UK. We would tax things that you brought into the UK, remitted, but we wouldn't necessarily tax non-UK things that you didn't otherwise bring or use or benefit from in the United Kingdom.
So the thing that changed in the budget that was announced at the end of October 2024 that largely came into force on the 6th of April 2025 is that we said, hey, this domicile regime, this remittance basis regime is kind of too beneficial to wealthy individuals. You have neighbors who are paying differential amounts of tax just because one person's kind of fore...