Just as swathes of Europeans consider their future in a post-Brexit UK, President Donald Trump could give US expats a good reason to stay in Britain by cutting their tax burden, according to research by the chartered accountants Bambridge Accountants.
The firm, which specialises in handling the tax affairs of US citizens living in Britain, predicts that 10-15 per cent of Britain’s 225,000 US expats would be impacted by the US President’s plan to scrap the Net Investment Income Tax, also known as the Medicare tax.
With the repeal of the tax likely to save wealthier US expats between $500 and $1000 each, up to an extra $34m (£26m) will be freed up for US high-fliers to pump back into the UK economy. London, as home to the UK’s highest concentration of wealthy American expats, would receive a disproportionately large boost from this windfall.
Since January 2013, high-earning US citizens have been subject to a 3.8 per cent surtax on investments when their net income is above $200,000 (for individuals) and $250,000 for married couples.
This additional charge is one of the main reasons some UK-based American expats end up having to pay US income tax in addition to UK tax, because US citizens cannot offset their UK tax credits against the additional tax charge.
The repeal of the Medicare tax is one of a raft of tax reforms announced by President Trump, which in typically understated style he has described as “the biggest in a generation.”
The plan was approved in May by the US House of Representatives but still needs the green light from the Senate before to become law.
Alistair Bambridge, senior partner at Bambridge Accountants, explains: “Tax cuts are a big priority for President Trump and while it’s unlikely he set out specifically to help Britain’s US expat community, they will emerge as big winners if the Senate gives this plan the nod.
“While the status of EU citizens in a post-Brexit Britain remains unclear, life for many in Britain’s US expat community could be about to get a little easier. The repeal of this surtax will spare thousands of Americans living here the bizarre and costly experience of having to pay income tax to both London and Washington.
“With most of the wealthiest US expats in Britain living and working in London, it’s likely the capital will receive the biggest windfall, both in tax dollar terms and in London’s improved prospects of retaining US high-fliers.”