Tax

The UK’s new carried interest regime, now in force, raises the effective tax rate on qualifying carried interest to c.34.1% and, as significantly, extends UK taxation to non-UK residents who perform investment management services in the UK. Carried interest is now treated as trading income, with non-qualifying carried interest remaining subject to rates of up to 47%, and the previous distinction between employees and non-employees is largely removed. Complex apportionment rules determine the proportion taxable in the UK by reference to UK and non-UK workdays, subject to grandfathering, de minimis and leaver protections that apply more generously to qualifying carried interest. The reforms create substantial compliance burdens and may expose internationally mobile investment managers to double taxation, particularly where treaty partners and HMRC take different views on the applicable treaty article and corresponding relief.

*The full article appears in the 26 June 2026 issue of Tax Journal and can be accessed here.