Lily
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Wake the hell up. It's not immigrants they are protecting, not really. It's the wealthy.
Both the UK and US tax systems have historically contained provisions that benefit the wealthy, but recent reforms in the UK have targeted some key sheltering mechanisms. While the US still offers numerous avenues for the wealthy to minimize their tax burden, the UK has been moving to close some of its long-standing loopholes.
Tax benefits for the wealthy in the UK and US
Recent tax policy shifts in the UK
The British government has undertaken recent reforms aimed at increasing the tax burden on the wealthy:
The US tax code continues to provide numerous benefits and strategies for the wealthy to minimize taxes:
Both the UK and US tax systems have historically contained provisions that benefit the wealthy, but recent reforms in the UK have targeted some key sheltering mechanisms. While the US still offers numerous avenues for the wealthy to minimize their tax burden, the UK has been moving to close some of its long-standing loopholes.
Tax benefits for the wealthy in the UK and US
| Area of taxation | UK provisions | US provisions |
|---|---|---|
| Non-domicile status | Until recently, wealthy individuals residing in the UK but legally "domiciled" elsewhere were taxed only on their UK earnings. The British government abolished this rule in April 2025, sparking fears among some elites of a higher tax burden and a potential exodus of millionaires. | The US has no equivalent. All US citizens and permanent residents are taxed on their worldwide income, regardless of where they live. |
| Capital gains | Capital gains from the sale of property or other assets are taxed at a lower rate than income from wages. For high earners, this can result in a lower overall tax rate than what middle-income professionals pay. | The US differentiates between short-term and long-term capital gains, with long-term gains being taxed at significantly lower rates (up to 20% for the highest earners) to incentivize investment. |
| Inheritance and estate tax | The UK inheritance tax system has various exemptions, including certain allowances for gifts and for a main residence passed to a direct descendant. These exemptions can reduce the 40% headline tax rate significantly. | The US allows an extremely large lifetime exemption for gifts and estates, which was nearly $14 million per individual in 2025. This allows the very wealthy to pass on vast sums to heirs tax-free, though this is set to expire in 2026. |
| Pensions and retirement | Pension contributions can be used by high earners to reduce their taxable income, offering a way to avoid the UK's high marginal tax rates. | High-income earners can defer taxation by maximizing contributions to tax-advantaged retirement accounts like 401(k)s and IRAs, which lowers their current taxable income. |
| Charitable giving | The UK's Gift Aid scheme allows higher-rate taxpayers to claim back a portion of their tax on charitable donations, further reducing their overall tax bill. | The US tax code offers a wide range of deductions for charitable contributions, which can be strategically used by high-income earners to lower their taxable income. |
The British government has undertaken recent reforms aimed at increasing the tax burden on the wealthy:
- Abolition of non-domicile status: Starting in April 2025, the UK effectively removed the "non-dom" tax advantage, forcing wealthy residents to pay UK taxes on their global income after living in the country for four years.
- Targeting loopholes: The government is also looking to close loopholes in the inheritance tax system and reform capital gains tax.
- Increased scrutiny: These changes have drawn criticism from some wealthy residents who claim it will drive capital and talent out of the country. However, the actual impact on capital migration is disputed.
The US tax code continues to provide numerous benefits and strategies for the wealthy to minimize taxes:
- "Buy, borrow, die" strategy: This allows wealthy individuals to avoid paying capital gains tax entirely by borrowing against their appreciated assets and leaving the assets to heirs, who receive a "stepped-up" basis on the asset's value.
- Pass-through deductions: Certain pass-through business profits can receive a 20% tax deduction, lowering the top effective tax rate on this income.
- Estate tax exemption: The very high lifetime exclusion amount for gifts and estates provides a significant sheltering mechanism, with the exemption set to change in 2026.
