What the 2025 US Election Could Mean for Expat Tax Rules in the UK

Every US election brings policy shifts that ripple far beyond American borders, and 2025 is shaping up to be no exception. For US citizens living abroad, particularly those based in the United Kingdom, changes in tax law are among the most closely watched outcomes. With both major parties discussing new approaches to global taxation, foreign income reporting, and IRS enforcement, expatriates are right to ask how the results might affect them.

At Xerxes Associates LLP, our team of dual-qualified advisers monitors these developments closely to help clients anticipate and adapt. While election campaigns often focus on domestic policies, expat taxation has quietly become a topic of growing interest in Washington. With more than nine million Americans living outside the United States, both the Treasury and Congress are increasingly aware of the financial and compliance implications of overseas citizenship.

One of the most significant areas under discussion is the citizenship-based taxation model, which requires all US citizens, regardless of residence, to report and pay tax on worldwide income. Some policymakers are exploring the idea of transitioning to a residency-based system, similar to the one used in nearly every other developed country. If introduced, this shift could free many US expats from the complex dual-reporting obligations that currently apply under the Foreign Account Tax Compliance Act (FATCA) and the Bank Secrecy Act (FBAR) requirements.

While such a change would represent a major simplification, it is important to remain realistic. A move away from citizenship-based taxation would require substantial legislative reform and international coordination, which means any transition would likely take years. In the meantime, expatriates in the UK remain bound by existing IRS rules, including annual reporting of income, capital gains, and foreign financial accounts.

Another area drawing attention is the Foreign Earned Income Exclusion (FEIE), which currently allows US expats to exclude a portion of their overseas earnings from federal taxation. Depending on the outcome of the 2025 election, adjustments to this threshold or its qualification criteria could impact how much relief US citizens abroad can claim. Similarly, the Foreign Tax Credit (FTC), which prevents double taxation by offsetting UK taxes paid against US liabilities, could see modifications that change the balance between the two systems.

Tax enforcement is also likely to evolve. In recent years, the IRS has expanded its use of data analytics and cross-border information sharing with HMRC. Under the FATCA framework, financial institutions in the UK are required to disclose details of US account holders, allowing the IRS to identify non-compliance more effectively. Regardless of who wins the election, this trend toward increased transparency is expected to continue. The political conversation may influence how aggressively the IRS prioritises overseas audits and how it allocates funding to global tax compliance programs.

For American entrepreneurs and high-net-worth individuals living in the UK, potential changes to corporate and estate tax are also worth watching. Adjustments to controlled foreign corporation (CFC) rules or inheritance exemptions could affect those holding investments or family trusts abroad. Early planning and structural review can help mitigate exposure before new laws take effect.

In every election cycle, speculation creates uncertainty. The best response for expatriates is to focus on preparedness rather than prediction. Ensuring accurate record-keeping, maintaining compliant filings, and staying informed through a professional adviser will always provide protection, no matter which policies emerge.

At Xerxes Associates LLP, we continuously monitor US and UK legislative changes to help clients understand how shifting political landscapes affect their tax obligations. Our advisers provide proactive strategies for both short-term planning and long-term wealth protection, ensuring that compliance remains seamless even as laws evolve.

To discuss how potential changes in US tax policy could affect your personal or business situation, visit www.xerxesassociatesllp.com and book a consultation with one of our dual-qualified US-UK tax specialists.

If you are a US expat living in London or elsewhere in the UK, get in touch with us to take advantage of the comprehensive, expert tax advice service that Xerxes Associates LLP provides to all our clients.