On 4 July, President Trump signed his One Big Beautiful Bill Act into law. The bill was narrowly passed after much debate and makes various tax cuts first initiated by Trump in 2017 permanent, as well as adding to these with additional tax cuts.

Despite estimated tax savings for most Americans, the newly introduced US remittance tax is potentially of concern for those transferring money out of the US.

In this insight, we break down the key changes announced in the bill, focusing on the impact it will have for US expats in the UK – helping you plan effectively.

Making rates and reliefs from the 2017 Tax Cuts and Jobs Act (TCJA) permanent

Most of the tax changes within the bill make the statutes first introduced in the TCJA from 2017 permanent. These were otherwise due to expire at the end of 2025.

Some of the statutes which are now permanent include:

• Modified Federal Income Tax brackets with lower tax rates, maintaining the top marginal rate at 37%;

• Elimination of personal exemption;

• Higher standard deduction, now indexed for inflation;

• Miscellaneous itemised deductions permanently eliminated;

• Increased State and Local Tax (SALT) deduction of $40,000, to increase by 1% each year until 2030,phased down to $10,000 where modified Annual General Income(AGI) exceeds $500,000;

• Limitation on deduction of mortgage interest to $750,000;

• Child tax credit of $2,000, indexed for inflation, with aphaseout beginning at $200,000;

• Child and dependent care tax credit now 50% of eligible expenses, the relevant percentage reduces once AGI exceeds $15,000;

• Increased Alternative Minimum Tax (AMT) exemption, and

• Estate and lifetime gift tax exemption increased to $15 million per individual, indexed for inflation.

Newly introduced tax changes

Further statutes within the bill build on the changes discussed above. These include:

• Making good on Trump’s campaign promise to eliminate tax on tips and overtime, although this relief is subject to limitations;

• Enhanced deduction for seniors: individuals ages 65 and over can claim an additional deduction of up to $6,000. This is phased out where AGI exceeds $75,000 and is temporary only from 2025 – 2028;

• $1,000 deduction for cash charitable contributions for those who do not claim itemised deductions;

• Enhancement to 529 plans to include elementary, secondary and homeschooling expense, and

• Limitation on itemised deductions.

New remittance tax

The new ‘Remittance Transfer Excise Tax’ was first proposed at 5% but has been passed as a 1% transaction-based excise tax on money transfers sent out from the US after 31 December 2025.

The tax is imposed regardless of one’s legal status in the US, so applies to US citizens, green card holders, individuals working in the US, and even tourists.

The new tax has been substantially mellowed since its initial proposal and will only now apply to transfers via cash, money order, cashier’s check or other similar physical instruments. It does not apply to credit or debit card transactions where the card is issued in the US, nor transfers originating from accounts held in or by most commercial financial institutions, which includes a broker or dealer in securities, investment and commercial banks.

The tax will be collected at the time of the transfer by the transfer provider and will therefore not be reported via a personal tax return. It will also not be creditable against Income Tax (as it had originally been intended).

Given the exclusions mentioned above, we do not expect this new excise tax to have a significant, if any, impact on US individuals residing in the UK.

Other changes that may be of interest

New Trump accounts

These are new accounts for children under 18 with a social security number. They are tax-favoured and will generally be treated in the same way as an Individual Retirement Account (IRA) for tax purposes. All newborn children born between 2025 and 2028 will receive a $1,000 deposit to fund the account. Contributions to these accounts are limited to $5,000, and investments are limited to various mutual and tracker funds.

Termination of the Internal Revenue Service (IRS) Direct File Program

Although no details have yet been shared, the Big Beautiful Bill Act has appropriated funds for a task force to investigate how to terminate the IRS Direct File Program.

What wasn’t included in the Act?

Residence-based taxation

Despite being a talking point throughout President Trump’s 2024 election campaign, the act does not make any reference to changes to the citizenship-based taxation for Americans. Trump has spoken of his wish to abolish worldwide taxation of US citizens living abroad in favour of a residence-based tax system, saying the US citizenship-based system is outdated and unfair. Despite this, and support from some Democrats, such a change is yet to be seen.

Expatriation

Significant tax changes often lead to queries regarding expatriation. It is worth noting that there was no mention of updates to the expatriation process at this time.