Autumn Budget 2026: Americans in the UK

Behind the scenes, the government published its summary following this summer’s consultation on the UK tax treatment of so-called “reverse-hybrid” entities.

The policy objective was to reduce the double tax burden facing individuals with interests in US LLCs or S-Corporations. Such entities are transparent for US tax but are viewed by HMRC as opaque corporations for UK tax.

The majority of respondents to the Consultation (including Blick Rothenberg) favoured a solution of following the US tax treatment, i.e. tax transparency. The government “came to the view that the transparency proposal would require a significant amount of new technical architecture, which would be complex to navigate and integrate poorly with the wider tax system”.

However, this remains a good news story. The Consultation outcome makes clear that the government remain committed to providing a solution to this challenge.

The favoured solution is by means of a credit relief system to alleviate the double tax burden. Mechanically, the proposed solution provides that a credit will be available for non-UK taxes suffered by the individual, which will include federal, state and local-level taxes. The Government’s intention is to provide legislation to specify eligible entities that will be treated as opaque, but where credit relief will be available.

However, a further technical consultation will be published to allow stakeholders to again influence the direction of travel. Legislation is expected in Finance Bill 2027-28, with claims under the new intended relief to be possible from early 2028.

The Government expressly acknowledges that prior periods and ongoing disputes are important and says that it is “considering practical options” for dealing with them, but with no further detail at this stage. We expect those practical options to be fleshed out during the next consultation.

For those who have previously adopted a tax-transparent position (perhaps following an Anson type argument), careful thought will be needed as to how to navigate this change.

Whilst this is a step in the right direction and provides light at the end of the tunnel, in the short-term many remain in limbo until clarity is achieved.

An increase in global tax – for some

For Americans who have been living in the UK for more than four years, any UK tax rises generally increase their effective global rate of tax, also increasing the amount of excess foreign tax credits they generate. For Americans who remain in the UK, such excess foreign tax credits will often go unused.

With UK tax rates being mostly higher than the US equivalent, it was pleasing to see that the headline income and capital gains taxes were left alone.

However, for Americans with interest income and rental real estate income, the UK tax rates will from 5 April 2027 be raised a further 2% to 24%, 44% and 49%.

Particularly for rental profits, this further distorts the UK and US tax treatment and exacerbates pre-existing differences between the two tax systems. Namely, generous depreciation deductions available exclusively for US Tax purposes, and limitation on interest expense relief for UK tax purposes. Those affected may wish to assess the impact of an additional 4% global tax exposure and re-evaluate the investment decision.

For those looking to sell their rental properties, pre-planning is recommended to properly quantify the US and UK tax position.

Trusts & residency

Buried in the detail of the Budget documents is a promise from Government to provide some administrative relief for trusts that would otherwise be brought into the UK tax net where the trustee moves to the UK.

For Americans, where trust structures are commonplace as part of regular estate tax and probate planning, this is a welcome announcement.

Legislation is expected to be introduced in Finance Bill 2026-27, which will have effect from 28 October 2026. We await further detail.

Founders’ relief

The announcement of a new Founders relief giving access to a 10% capital gains tax rate on up to £10m of qualifying gains is in theory good news for Americans as it reduces UK tax to below the corresponding US 20% long-term capital gain rate.

As proposed, a qualifying individual for the purposes of Founders’ Relief will need to own at least 25% of the ordinary shares, have held at least 25% from the outset, have held the shares for at least five years, and have been UK resident for at least five consecutive years prior to the date of the disposal.

Although that sounds promising, many will not be able to benefit as there are also conditions on the company.

Only companies within the scope of UK corporation tax will qualify. Furthermore, as proposed, the company itself must meet two of three tests for the individual to qualify for the relief. These cover turnover (average compound growth of 25% from a minimum of £10 million), headcount (average annual compound growth of 25%, from a minimum 15 employees), and innovation (£1.5m of qualifying expenditure on research and development).

This is subject to a consultation process, with the new relief to be in place from April 2027.

Discover our latest expert analysis and practical guidance on the measures announced in the Autumn Budget 2026 on our Budget Hub.