A UK resident who owns a US limited liability company (LLC) can be taxed twice on the same profits, and the government’s own papers put the effective rate as high as 75%. The fix it published on 28 October is a credit that cannot be claimed until early 2028, so your bill at that rate stands for now. What moves sooner is the tax on everything else the same person holds in Britain.

The big picture:

The mismatch is built in, not a filing slip. In the United States an LLC is normally see-through: members pay tax on the profits as the profits arise, whether cash is paid out or not [1]. HMRC (the UK tax authority) has read almost every LLC the other way since 1997. It treats the entity as a separate company, so the member pays again when the money comes out [2].

Two charges, on two different bases, are not tax on the same profits in treaty language. That is the sentence that matters. Because the bases differ, the UK-US treaty cannot give relief and the two systems simply stack, which is why HMRC’s own paper says a member can face “a high effective tax rate, potentially as high as 75%” [2].

The cases people reported are worse at the edges. Answers to the summer consultation put rates “commonly in the 55 to 75% range”, with several above 80% and some past 90% once US state and local taxes are counted [1]. Sixty-four written replies came in. About a third of those who replied said the rate had changed where they live, whether they took a UK posting, or whether they were planning to leave [1]. I read that fraction twice before believing it. A rule about what counts as a company is deciding where people live.

Then came a choice nobody had been asked about. The paper had floated treating see-through LLCs as see-through here too, which would have matched the two systems and let the treaty work again. On 28 October ministers dropped that for cost and complexity, arguing the route “would require a significant amount of new technical architecture” [1]. The LLC stays opaque and the payout is taxed at dividend rates. The member may elect a credit for foreign tax they paid in person, worked out on an average rate rather than by tracing the money [1].

The rate tables printed the same day matter just as much. From April 2027, tax on savings becomes 24%, 44% and 49% across the UK. Property income gets its own table at 24%, 44% and 49% in England, Wales and Northern Ireland [3]. Today property income is charged at the main 20%, 40% and 45% rates [4]. The dividend table, which the new credit is set against, does not move: 10.75%, 35.75% and 39.35% in both years [4].

By the numbers

  • 75% — Worst case HMRC concedes: the rate a UK-resident LLC member can reach when the US taxes the profit and the UK taxes the payout [2].
  • 55% to 75% — What members reported: the common band its own evidence gives, with several above 80% and some past 90% after state and local tax [1].
  • 9.65 points — Gap between two tables: the top property rate of 49% less the top dividend rate of 39.35%, from 6 April 2027; today the same gap is 5.65 points [4].
  • Early 2028 — First date a claim can be made: when the new credit becomes claimable, with law still to come in a future Finance Bill [1].

What I’d watch:

The fine print decides whether this works, and three pieces of it are still open. What I’m watching next is whether the credit is usable by someone who owns 5% of an LLC and cannot see its books.

  • Whether members elect at all: the credit is optional, taken per member, and worked out on an average foreign rate instead of tracing each item. That suits a passive investor. It can misfit a founder whose US deductions have no UK twin [1].
  • What happens to earlier years: the paper says only that the government is “considering practical options” for prior periods and open disputes. That is the language of a problem still open rather than one closed [1].
  • The four-year curtain: new arrivals already get 100% relief on foreign income and gains for the first four years they live in the UK [1]. That relief hides the LLC problem while it runs, then hands the member back to the full rate. That happens roughly when the credit turns up.

A relocation and tax model on this site already puts two countries’ rates side by side. The comparison that bites here is not two countries, but two tables inside one.

The catch

The relief is a credit, and a credit can only cancel tax. Set against UK tax on a payout at dividend rates, it tops out, in effect, near 39.35%. It wipes out the UK charge but cannot hand back the gap when the American bill is the larger of the two [1]. Ministers’ own aim is modest: a rate “often broadly comparable to that of an investor in a business conducted through a UK limited company” [1].

The gap between 39.35% and 49% flatters the story if it reads as a saving. Dividend rates are lower because the firm has already paid tax on the profits behind a dividend, which is why that table has stayed below the others. I could be wrong, but the Treasury looks to me to have picked the cheapest table as the vehicle for its repair while pushing the other two up in the same document.

None of this is law yet. The credit comes through a further consultation and a future Finance Bill, with first claims in early 2028 [1]. The rate tables come through Finance Bill 2026-27 for April 2027 [3]. Anyone deciding this winter is deciding on a promise in both cases, and the two land about five months and 15 months from now.

At a glance

  • The Big Shift: Britain dropped its plan to treat US LLCs as see-through. It will let UK-resident members elect a credit for foreign tax from early 2028, while the entity stays opaque and payouts stay taxable at dividend rates [1].
  • Why It Matters: Until then the double charge stands, at a rate HMRC puts as high as 75%. The same Budget lifts savings and property income to 24%, 44% and 49% from April 2027 while leaving the dividend table alone [2][3][4].
  • What I’d Watch: whether the credit is usable in practice, what happens to earlier years, and how the four-year relief for new arrivals sits against a credit that starts in 2028.
  • The election: an optional claim on an average foreign rate, which is simple for a passive member and awkward for a founder with US deductions.
  • Prior periods: the paper promises only that options are being weighed, so old bills and open enquiries may not be covered.
  • The four-year curtain: relief on foreign income and gains hides the LLC problem for new arrivals, then lifts just as the credit arrives.
  • The Catch: a credit cannot top the UK tax it offsets, so it will not refund a larger US charge. It is not law yet. The lower dividend table is lower by design rather than as a favour [1].

Related reading

Sources

[1] HM Revenue & Customs, “UK resident individual members of LLCs and other reverse hybrids — Summary of responses”, published 28 October 2026 — https://www.gov.uk/government/consultations/uk-residentindividualmembers-of-llcs-and-otherreversehybrids/outcome/uk-resident-individual-members-of-llcs-and-other-reverse-hybrids-summary-of-responses [2] HM Revenue & Customs, “Consultation on reform to taxation of UK-resident members of LLCs and other reverse hybrids”, updated 28 October 2026 — https://www.gov.uk/government/consultations/uk-residentindividualmembers-of-llcs-and-otherreversehybrids/consultation-on-reform-to-taxation-of-uk-resident-members-of-us-llcs [3] HM Revenue & Customs, “Budget 2026 — Overview of tax legislation and rates (OOTLAR)”, §1.1 and §1.2, published 28 October 2026 — https://www.gov.uk/government/publications/budget-2026-overview-of-tax-legislation-and-rates-ootlar/budget-2026-overview-of-tax-legislation-and-rates-ootlar [4] HM Revenue & Customs, “Annex A: rates and allowances” (Budget 2026), published 28 October 2026 — https://www.gov.uk/government/publications/budget-2026-overview-of-tax-legislation-and-rates-ootlar/annex-a-rates-and-allowances [5] ICAEW, “Budget: tax rates on property and savings income increased”, 28 October 2026 — https://www.icaew.com/insights/tax-news/2026/oct-2026/budget-tax-rates-on-property-and-savings-income-increased