Should I protect my finances ahead of US and UK elections?

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I run a consultancy business based in the UK. I am British, my wife is American and we each have permanent residency status on both sides of the Atlantic. Our two children are dual citizens. I am concerned about possible tax changes which may follow the 2024 elections in both Britain and America. The US is quite strict about taxing income made abroad and the UK may have a government that favours higher taxation on people in the upper income band.

Are there any steps that we should take now to protect our assets? My wife and I both fall into the highest income tax band, and while this money is mostly earned in the UK, we own property in the US and have savings accounts and other investments there.

Aidan Grant, senior associate at law firm Collyer Bristow, says you are right to be cautious about the potential for double taxation. While you are dual resident, your eventual tax rate on income and gains will be at whichever country’s rate is highest. However, with careful US and UK tax reporting, you can often claim a credit in one country for tax paid in the other. That said, this is not always possible when tax arises to a different taxpayer or at a different time.

For example, Americans claiming the remittance basis may pay UK tax on a later remittance of foreign wealth without a credit for the original US tax paid. We therefore often advise UK-resident Americans to pay tax in both countries as it arises, to maximise tax credits and minimise future UK tax on remittances.

Care must also be taken if, for example, your wife becomes a substantial shareholder in the UK family consultancy business. Non-US companies controlled by Americans can be exposed to additional US tax and reporting and, in a worst-case scenario, the profits of the company can be automatically attributed to and taxed on the American shareholder.

Americans commonly seek estate planning guidance from US-based attorneys. While the resulting plans may be tax efficient in the US, there may be potential UK tax pitfalls. For example, many Americans hold their wealth through US living trusts to avoid probate, but for UK residents this may give rise to tax complications. Instead, we usually recommend that couples put in place tax-efficient wills which ensure that both US estate tax and UK inheritance tax are at least deferred until the surviving spouse’s death.

Potential tax changes in both countries could result in wealthy couples becoming exposed to higher levels of taxation upon their deaths. However, leaving wealth either outright or in an appropriate will trust for a surviving spouse’s benefit should remain excellent and highly tax-efficient planning that may outweigh the costs and inconvenience of US probate.

We would not usually advise UK-domiciled people to create lifetime trusts that exceed their inheritance tax allowance (currently £325,000). However, if your wife is not taxed as a UK-domiciled person, she should be able to create a trust that is inheritance tax efficient in the UK and uses her larger US estate tax allowance. If she settles this trust before the coming UK election, then we hope that its tax efficiency will survive future tax changes. This may have the added benefit of using up her US allowance before it drops substantially in 2026.

While such a trust may be efficient for inheritance tax, you should plan carefully to avoid double taxation on the trust’s income and gains.

Can I challenge HMRC’s demand for payment?

HM Revenue & Customs has decided that my business owes a large amount of additional tax. I don’t agree and have not paid. Now the tax authority has served a statutory demand for payment on the company. What does this mean and what should I do about it?

Jessica Williams, managing associate at Mishcon de Reya, a law firm, says a company has 21 days from the date that the statutory demand was served to make a payment or agree a repayment plan with HMRC. Or to prove that the debt is not due and owing, or obtain a court injunction restraining HMRC from presenting a winding up petition against the company.

Such injunctions are typically urgent and costly. If you do not take any of these steps (or cannot reach an agreement with HMRC to pause enforcement action), it will be open to the tax authority to commence proceedings against you, seeking to wind up the company. HMRC has shown repeatedly that if it is ignored it will follow through with winding up proceedings.

If you go down the injunction route, the application must be supported by a witness statement, setting out in detail how the debt is disputed, and demonstrating to the court that HMRC should not be allowed to proceed with a winding-up petition. The application will be listed for hearing, and both HMRC and the company will be entitled to make representations. If your application is unsuccessful, HMRC will then be allowed to commence winding up proceedings against the company.

We have three top tips for dealing with such instances. First, engage in correspondence with HMRC early — if you need a Time To Pay arrangement, the authority is more likely to be open to this request if you approach it early with a suggestion for payment down of any debts due. It is best not to wait until HMRC is knocking on your door with a statutory demand.

Second, if you do not agree with a tax bill, be sure to put your dispute in writing to HMRC at the earliest possible opportunity. Then, follow up — repeatedly if needed — to ensure your dispute is being looked at and dealt with. Do not assume, just because your letter has been sent, that HMRC is reviewing your case and it will not take further steps.

Finally, seek legal advice. If you are in any doubt as to your position, seek advice from a tax disputes or insolvency lawyer (preferably choose a law firm that has both capabilities). These matters can be complex. Input at an early stage can help resolve matters without the need for costly court procedures.

The opinions in this column are intended for general information purposes only and should not be used as a substitute for professional advice. The Financial Times Ltd and the authors are not responsible for any direct or indirect result arising from any reliance placed on replies, including any loss, and exclude liability to the full extent.

Do you have a financial dilemma that you’d like FT Money’s team of professional experts to look into? Email your problem in confidence to money@ft.com.