For now, you plan to remain a UK resident for another four years while your children finish their education.<\/p>\n
At first glance, this may seem like a simple question of tax rates. In reality, it is more nuanced. From 6 April 2026, the UK will tax carried interest as income rather than capital gains. This is a major shift, and makes the classification of the carry, the location of your work, and any future change especially important.<\/p>\n
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Will your carry qualify?<\/p>\n
This is the critical starting point. Not all carry interest will be taxed at the same effective rate. The rules focus on the fund\u2019s average asset holding period (AHP). Broadly:<\/p>\n
\tIf the weighted average holding period is less than 40 months, the carry is treated as income-based and taxed at full rates
\n\tIf the AHP meets the threshold, a multiplier applies, producing an effective combined tax rate of around 34%<\/p>\n
In practical terms, this means you should not assume your carry will qualify for the lower rate. You need confirmation from the fund and advice on your own position. Broadly, if the average asset holding period is around 40 months, the carry should be qualifying, but this must be carefully checked.<\/p>\n
What if you remain a UK resident?<\/p>\n
If you remain a UK resident, the UK will remain central to the tax analysis. The broad position is that the carried interest received from 6 April 2026 is taxed as income rather than capital, although carried interest derived from services performed in earlier periods of non-residence in the UAE would not be taxed. That is a fundamental change. In the 2025\/26 tax year, a UK-resident fund manager is taxed on carried interest at a 32% Capital Gains Tax rate, but under the new regime, it shifts fully to Income Tax.<\/p>\n
Read also: Wealth planning: why the UK remains a strategic hub for entrepreneurs<\/a><\/p>\n What if you leave the UK at a later date?<\/p>\n Leaving the UK may change the position, but not automatically. The government\u2019s stated approach is that carried interest should, in principle, be taxed to the extent it relates to services performed in the UK. To work that out, it intends to use a time-based apportionment method based on UK workdays.<\/p>\n There are, however, important transitional rules for internationally mobile individuals.<\/p>\n For carry paid to a non-resident:<\/p>\n \tUK services performed before 30 October 2024 are treated as non-UK services This means that UK exposure may persist for a time after departure, particularly where services were performed in the UK after October 2024. Over time, however, that exposure can fall away if the conditions are met.<\/p>\n The government\u2019s stated approach is that carried interest should, in principle, be taxed to the extent it relates to services performed in the UK<\/p>\n What if you move to the US and continue working?<\/p>\n This is where the planning becomes more intricate. The UK rules may still matter if you continue to work for the fund and make return visits to the UK. In broad terms, it will be important that workdays in the UK remain below the relevant thresholds and that you do not inadvertently become a UK resident again. The government\u2019s cross-border framework is built around UK workdays and residence status.<\/p>\n There is also a wider cross-border issue. The UK now treats carried interest as income from 6 April 2026, while other countries may continue to treat it as capital. That can create uncertainty around how the two systems interact and whether double tax relief will work smoothly in practice. For that reason, anyone considering a move to the US or another jurisdiction where they work, should seek advice before relocating, especially if the new country may also tax the carry.1<\/p>\n
\n\tUK duties are disregarded unless the individual performs 60 or more UK workdays in the relevant tax year
\n\tAfter three full tax years of non\u2011residence, earlier UK services can be treated as non\u2011UK services, provided the 60\u2011day threshold is not breached<\/p>\n
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