UK Carried Interest Tax Changes from 6 April 2026 – practical implications for fund managers

Key points

• Carried interest will now be taxed as income rather than capital gains. UK resident fund managers should consider the impact on their tax profile and planning in the ways discussed below.
• Fund managers moving to or from the UK, or working across jurisdictions, should review their tax profiles following significant changes to the carried interest and 'non-dom' regimes.
• Foot Anstey's private wealth experts can help UK and international managers with tax and wider estate planning

The New Regime

From 6 April 2026, the UK carried interest regime moves from a capital gains framework to an income‑tax‑based system, with National Insurance Contributions. From that date, all carried interest will be treated as trading profits. Qualifying carried interest will be taxed on 72.5% of its amount, giving an effective rate of 34.075%. Non‑qualifying carry may be taxed up to 47%. 

The difference between qualifying and non-qualifying carry has not significantly changed and is based on the average holding period of a funds investments (with 40 months or more on a weighted average basis being 'qualifying').

What should I be thinking about as a UK resident fund manager?

The move from 32% tax to 34.075% means UK resident recipients of carried interest are unlikely to see substantial changes to their tax liabilities as a result, which would otherwise give rise to alternative structures being explored.

However, the change from a capital gains tax to an income tax regime does introduce a number of points that are worth considering: 

• Pension contributions.
  • For individuals who normally have the full annual pension allowance (adjusted income below £260,000), large one-off income receipts will impact the year of receipt but large contributions using previous unused allowances may be possible. 
  • Care is required though where annual allowances are already tapered, and often exceeded by employee and employer contributions. One-off payments will further taper allowances potentially resulting in annual allowance charges on regular contributions, creating a further charge to income tax.

• Venture capital investments (EIS/SEIS/VCT).
  • Such investments can provide for income tax reductions as a % of the initial investment, and loss reliefs if investments are unsuccessful.

• Charitable gifting
  • Gift aid donations, or gifts of certain assets to charity each result in income tax deductions via different mechanisms.

• Tax payment cashflows
  • Ensuring that income tax payments on account are properly managed to reduce an unnecessary cashflow burden.

What should I be thinking about as an international fund manager working in the UK?

There have been considerable changes that may impact any fund managers moving to or from the UK in existing roles or when taking up new roles whilst retaining previous carry entitlements. An overview of the regime has been provided below but formal advice should be taken in such circumstances:

• Non-UK residents will be subject to income tax on carried interest to the extent that their duties were carried out in the UK. However, to soften the blow for those working occasionally in the UK, certain UK workdays can be excluded entirely:
  • Days prior to 30 October 2024.
  • Days in a year of non-UK residence and fewer than 60 UK workdays.
  • Days prior to a period of three consecutive non-UK tax years.

What if I am moving to the UK or do a considerable amount of work here?

• Where individuals have moved to the UK and continue to provide 'investment management services' under an ongoing or different role, any tax that does arise that reflects non-UK work may be sheltered under the new four-year Foreign Income and Gains ("FIG") regime, if received in that period.
• Where services are carried out in and fall to be taxed in the UK and another country, a strict day count apportionment will now be required (as opposed to a just and reasonable approach as was previously the case).
• This may lead to friction when claiming relief under a double tax treaty with another country, particularly in circumstances where it is taxed as an investment return in that country. 

What if I have left or am leaving the UK?

In addition to the above, the following may be relevant if the period of non-UK residence is less than 5 years

• Where an individual incurs a carried interest capital gain while temporarily non-resident in the 2025/26 tax year or earlier, they will be subject to UK income tax in the year they return to the UK according to the new regime. UK tax residence should be carefully monitored, especially during the first five years after leaving the UK.

How can Foot Anstey help?

The succession and tax team at Foot Anstey can provide detailed advice on carried interest and wider UK taxation matters for fund managers, whether based in the UK or overseas. Our thorough understanding of the cashflow and taxation position can also assist in tailoring our estate and IHT advice to each unique situation.