Considerations for US persons coming up to the 2025 tax year end

While year-end tax planning typically involves many of the same considerations each year, we've outlined the key actions and reminders below to help ensure you are well prepared.

1. Capital gains planning

Coming up to year end here are four things American’s living in the UK should be aware of:

1. HMRC thinks of assets in GBP and the IRS thinks of assets in USD, which means any fluctuation in the exchange rate between the date of purchase and sale of a security could create an unforeseen gain in either currency. Approach the notion of net perfect tax position with caution when dealing with different currencies.
2. Avoid ‘bed and breakfasting’ (rebuying the same asset within 30 days) as this may allow the HMRC or IRS to disallow losses incurred.
3. Individuals should remember that under both tax regimes, capital losses can be carried forward indefinitely. These could also be a useful tool to offset any future tax increases. Unfortunately, losses cannot be carried back and so ensuring losses are realised before or in the same year, as gains, is a useful planning tool.
4. US individuals who do not offset gains will need to bear in mind the Net Investment Income Tax, which is payable on any investment income and cannot be offset by tax suffered in the UK.

2. Investment check-in

It is important to review your current portfolio holdings to ensure tax efficiency in preparation for the upcoming tax year, focusing on passive foreign investment companies (PFICs) for US tax purposes and non-reporting funds for UK tax purposes.

The end of the calendar year is your final opportunity to make these plans in preparation for the upcoming US/UK dual-tax seasons.

3. Paying your US taxes early

Due to the differing fiscal years in the US and the UK, individuals who claim foreign tax credits on a paid basis, may be required to accelerate their UK tax payment within the current calendar year.

Making an advanced payment in December 2025 will ensure that there are tax credits available to offset any 2025 US tax that would otherwise be due. Failing to do so may lead to a timing issue as payments for tax due on income realised in 2025 may not be due to HMRC for some time.

4. Required Minimum Distributions (RMD) and contributions

Individuals who hold certain IRAs must take a required minimum distribution each year from the 1st of April, following the year in which they turn 73. These rules prevent taxpayers who have reached retirement age accumulating tax-free returns indefinitely. Failure to take the minimum distribution results in the required distribution being taxable at 50%.

If you are not at distribution age, it might be worth looking at your current contribution levels. If you are able to contribute into an IRA, it is a good time to make this contribution.

5. Annual gifting allowances and donations

The idea of gifting assets away can be unnerving, especially if you are near or at retirement age and have spent the majority of your life building a pot to live on.

However, seeking advice may help you become comfortable with the idea of gifting. It may be rewarding to see people and charities you care about benefit whilst you are still around, while at the same time reducing the portion of your estate given to the relevant tax authorities following your death and profiting from an immediate tax benefit. How can you make gifts?

1. Annual gift exclusion – A US person can gift up to $19,000 in 2025 to any number of people without incurring gift tax.
2. Gifts to spouse – Typically covered by the marital deduction, unless your spouse is a non-resident alien, in which case gifts will be restricted to $190,000.
3. Charitable donations – It may seem simple, but you need to consider the US/UK tax implications: whether gift cash, when to do it, appreciated assets, and which funds to do it from (clean/mixed, etc.).

If you’re thinking of gifting, please speak to an advisor. We would be happy to help.