How to help US expats navigate their wealth goals

This article is part of
Guide to advising US expat clients

How to help US expats navigate their wealth goals

Advising US expat clients can be tricky, as it requires advisers to give proper consideration to how best to meet clients’ wealth goals in the most tax efficient manner.

This means remaining UK tax efficient, while at the same time being mindful of US tax rules and implications.

While it is true that investment options available to US expats living in the UK are limited, there are things advisers can do to help their US expat clients invest in a way that avoids unnecessary and burdensome investment tax traps.

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The first step for a US person coming to the UK, or those who have been living in the UK for many years, is to establish a UK tax status.

Establish tax status

Advisers must first clarify whether the client is a non-dom – someone living in the UK considered under British law to be domiciled in another country – and how long they have been residing in the UK, says Daniel Freedman, managing director and co-founder of London & Capital.

If the client has been living in the UK for less than seven years, they will only need to pay tax in the US on their investments – as long the investments are kept outside of the UK, says Mr Freedman.

He adds: “From a US point of view, you are taxed on a worldwide basis under the US tax regime and it doesn't matter where you live; from a UK point of view, you have the domicile rules to consider.”

Indeed, US nationals living in the UK face a series of unique challenges, not least because they will often bring with them their US tax-paying status, notes Simon Gorbutt, director of wealth structuring solutions at Lombard International Assurance.

Mr Gorbutt explains: “US citizens in the UK will, in principle, face UK tax on worldwide income and gains, together with US tax on a worldwide basis.”

While some clients in this situation may be able to use the UK’s remittance basis – some tax credits might be available depending on how long they have lived in the UK – the overall compliance burden can be high, he adds.

From an investment perspective, this can lead to major hurdles.

But, while US taxpayers could find the universe of investments available to them in the UK extremely restricted, it is not impossible for advisers to find tax-efficient investment solutions.

Define wealth goals

Andrea Solana, head of advanced planning at Maseco Private Wealth, says having clearly defined personal wealth goals and objectives are step one of determining an appropriate investment strategy and asset allocation.

Ms Solana explains: “When you are a US person paying tax in the UK on an 'arising basis', it is important to look closely at the structure of both onshore and offshore assets.