With Donald Trump returning to the White House, many high-net-worth individuals and American businesses with operations in the UK are keeping a close eye on potential tax changes. His administration previously introduced sweeping reforms through the Tax Cuts and Jobs Act (TCJA) in 2018, which had a lasting impact on both individuals and businesses. As discussions around Trump’s tax plan unfold, it’s crucial to understand what his presidency could mean for your financial planning and tax obligations.
In this blog, we’ll explore key areas of concern—possible government shutdowns, immediate tax changes, and how you can prepare for what’s ahead.
1. Potential government shutdowns and delayed tax filing
A hallmark of previous Trump administrations was the frequency of government shutdowns during budget negotiations. These shutdowns can have direct consequences on tax filings and compliance.
- Delayed tax processing: During a shutdown, the IRS typically operates with limited staff, which can delay tax return processing, issuance of refunds, and response times to inquiries.
- Extended deadlines: It’s unlikely the deadlines will be extended. However, Biden recently signed a stop gap funding the government up to March 14th. If there is no further funding beyond this date for FY 2025, then there could be a government shutdown, which would be significant since it is in the middle of tax season peak times.
What to do:
Plan for potential delays in tax filings by ensuring that documentation and returns are prepared well in advance of deadlines. Working closely with a tax advisor can help mitigate risks if deadlines shift unexpectedly. For ex-pats, utilising the available extension to October and December 15th is paramount in allowing more time to respond to the uncertain US political landscape.
2. Immediate tax changes under Trump’s tax plan
One of Trump’s campaign promises was to revive key provisions from the TCJA and introduce further tax cuts aimed at stimulating economic growth. While large corporations stand to benefit, high-net-worth individuals and SMEs with international operations may face new challenges.
- Corporate tax rate reduction: Trump has indicated a desire to further lower the corporate tax rate, which could benefit American businesses operating both domestically and internationally.
- Repeal of Global Intangible Low-Taxed Income (GILTI) provisions: This is more likely to be extended or made permanent, which means that the US government under Trump is unlikely to align with the OECD global taxation models. This is significant for Americans living overseas in an OECD country like the UK because the misalignment of tax treatment (a major issue with America and ex-pat citizens) means that some of their business income could be double taxed.
- Estate and gift tax reforms: Trump’s administration may revisit estate and gift tax rules, potentially increasing thresholds or eliminating certain taxes altogether, offering significant benefits for high-net-worth individuals engaged in cross-border wealth planning.
What to do:
Stay updated on legislative developments and review your current tax strategies. For business owners, understanding how potential GILTI changes could affect your bottom line is key. Individuals should also consider estate planning adjustments based on possible reforms.
How you can prepare for uncertainty
Given the uncertainty surrounding Trump’s tax policies and the possibility of delayed IRS operations, proactive planning is essential.
- Review cross-border tax strategies: Whether you’re a high-net-worth individual with investments in the US or a business owner with UK operations, reviewing your tax strategies to account for potential US changes is critical. This includes evaluating tax-efficient structures and forecasting potential liabilities under different scenarios.
- Scenario-based tax modeling: With uncertainty about how Trump’s tax plan will be implemented, businesses should engage in tax modeling. This involves forecasting potential tax outcomes under various scenarios to ensure that you’re prepared for whatever comes next.
- Early filing and compliance: Since government shutdowns can delay processing times, early preparation of tax returns and filings will be crucial. Ensure all necessary documentation is ready well ahead of deadlines to minimize disruptions. If early filings aren’t possible – for example, if information from a foreign (UK) tax return is necessary to complete the US return – then make sure to utilize the extensions.
Seek expert guidance for what Trump’s win means
The return of Donald Trump to the presidency introduces significant uncertainty for American expats and businesses with UK ties. Whether it’s navigating delayed filings due to a government shutdown, adjusting to immediate tax changes, or preparing for long-term reforms, early action is the best strategy.
At SE Tax Professionals, we specialize in helping high-net-worth individuals and businesses manage complex cross-border tax obligations. Our team can help you stay ahead of potential changes, optimize your tax position, and ensure compliance in both the US and UK. Reach out today for expert advice tailored to your unique situation.