US Edition
Rachel Reeves, Labour’s shadow chancellor, said in November that if her party gains power in next year’s general election, she will abolish non-domiciled resident, or non-dom, tax status within Britain.
As a result, increasing numbers of wealthy Britons are reportedly preparing to move to America.
Non-doms are people whose permanent residence is outside the UK. British tax laws mean their non-UK income is only taxed in the country they live in, potentially at lower rates than in Britain.
Florida already has one of the largest populations of British expatriates in the US, thanks to its warm and sunny year-round climate. Experts have noticed a rise in the number of well-off Britons looking to cross the Atlantic – but it's not the only tax-friendly option if you’re considering upping sticks.
Prior to moving to America, however, it is important to take into consideration local taxes and the impact of issues such as health insurance. Unlike in Britain, Americans must obtain health insurance – typically known as a “health plan” – privately, either at their own expense or through an employer.
While schemes such as Medicare exist, experts agree that this very basic level of cover does not stretch to that offered by Britain’s NHS. Unlike some other countries, Britain has no healthcare costs recovery agreement with the US – meaning your previous contributions to the British healthcare system through National Insurance payments count for naught in America.
Most Americans get health insurance through their employer, which typically covers some of the costs. For family coverage, a worker will typically contribute $6,106 (£4,900), or about $509 (£400) per month, while the average worker contribution for a single policy is $1,327 (£1,060).
This means about $110 (£90) and $509 (£410) dollars a month may need to be spent on health insurance.
Income tax is another important topic to consider. The US has seven federal income tax brackets, with rates of 10pc, 12pc, 22pc, 24pc, 32pc, 35pc and 37pc.
The top rate applies to income of over $500,000 (£400,860) per year, while the middle classes (earning $95,376 to $182,100) will typically fall into the 24pc bracket.
Generally, you will need to be sponsored by a US employer before you can apply for an immigrant visa. Permanent residency means applying for a Green Card, which is typically available only to the most highly skilled workers unless you already have close family living in the US.
Retiring to America is harder, but can be achieved through the EB-5 investor visa scheme.
To take advantage of this you need to invest a significant sum – currently $800,000 (£653,636) – into a pre-approved enterprise, but doing so provides an opportunity to become a US citizen with permanent residence.
Some states apply their own income taxes on top of the federal rate. Living in New York State, for instance, will add a further 3.8pc to your deductions.
Net investment income is subject to a federal 3.8pc Medicare tax, according to PWC, although non-doms may be able to escape this provision.
It’s a lot to take in. But here, Telegraph Money shines a spotlight on the best places in the US to move to if you want to shelter your riches from the taxman.
Florida is a popular destination for British expatriates looking to escape from old Blighty’s traditionally grey and rainy weather.
With locations such as Daytona Beach enjoying 229 sunny days a year, versus London’s average of 126 days, it’s not hard to see the Sunshine State’s principal attraction.
Florida has no capital gains, inheritance or estate taxes, meaning that, federal deductions aside, preserving your wealth from the taxman’s depredations is easier than in some other jurisdictions.
The cost of living in Florida is higher than some other states, however. The state imposes a 6pc levy on sales, together with a cap on local sales taxes of 2pc, with an across-the-board average of 7.02pc according to the Tax Foundation.
While the cost of living in Florida is estimated by the US Census Bureau as around $400 cheaper per month than New Hampshire, assuming you have a mortgage on your primary residence, living costs without a mortgage in Florida are $590 per month (around £470).
This means if you can buy a property there for cash – average prices for a three-bedroom house are somewhere between $180,000-$450,000 (£140,000-£350,000), depending on your location within the state – you can keep your outgoings tolerably low.
Alaska is potentially one of the lowest tax options for those looking to emigrate to America. It has no state-wide income or sales taxes, although local municipalities have the power to set their own sales taxes.
Property taxes are also relatively low in Alaska, although rates vary between individual towns, cities and hamlets. Picking carefully could mean saving thousands a year – although the state’s low population density means there might be a catch in terms of quality of life.
Population is such a concern that the state authorities pay people to live in Alaska, which has a headcount of around 750,000 – less than a tenth of London but spread across an area 1,000 times larger.
The Alaska Permanent Fund Dividend splits some of the state’s oil and mineral wealth among those who have lived there for more than 12 months and who are not convicted criminals.
Last year this was worth $3,284 (around £2,600), meaning local taxes can be completely offset by the state’s own payouts.
The lowest combination of sales and property taxes in Alaska is found in the municipality of Nightmute, which lies on Alaska’s western coast, roughly 500 miles from Anchorage.
Nightmute’s 304 inhabitants paid an average of just $7 each in property and sales taxes during 2022, according to official statistics.
Local reports suggest the sale, possession and consumption of alcohol is banned in the area, however. Amenities include a school, a post office, an airstrip and a quarry. It reaches summer high temperatures of 14° Celcius in July and August, and lows of -15° in January.
Those seeking the congeniality of urban life may wish to opt for Anchorage, the state’s largest metropolis.
Residents of that city paid an average of $2,421 (£1,900) in property and sales taxes during 2022, according to the official Alaska Taxable report.
Wyoming is among the most tax-friendly states in America. It has no income tax and a state-wide sales rate of just 4pc, and also has no state inheritance or capital gains tax.
The cost of living in Wyoming, as inflated by taxes, tends to be lower than other states. Local municipalities are restricted to charging a maximum of 2pc extra sales tax on goods and services, yielding an average state-wide rate of 5.36pc according to the US Tax Foundation.
“With no corporate or personal income tax, state and local governments rely heavily on mineral revenues to keep services afloat,” adds the Wyoming Taxpayers’ Association (WTA).
You can expect to pay the usual taxes on alcohol, tobacco and motor fuel. Petrol and diesel are taxed at $0.23 per gallon, or about 5p per litre. This compares favourably with the UK’s rate of 52.95p/litre, according to Britain’s RAC Foundation.
WTA figures say cigarettes are taxed at $0.60 per pack of 20, with consumers paying 7.5pc of the purchase price for vapes and e-cigarettes.
“In Wyoming, the extractive industries play a major role in generating revenues for state and local governments,” explains the association.
“In fact, it is estimated that minerals directly contribute roughly two-thirds of the state’s revenue.”
Home to Matthew McConaughey, ExxonMobil and the birthplace of the modern computer microchip, the state of Texas is the world’s eighth largest economy by gross domestic product (GDP), putting it ahead of Australia, Spain and Italy.
Its tax environment reflects its success, with Texas charging no state-wide income tax at all. This includes pension and investment income – although its property and sales tax rates are relatively high as a result.
A 6.25pc state sales tax combined with up to 2pc added by local city and municipalities yields an average rate of 8.2pc across the board according to the Tax Foundation.
AARP, the American Association of Retired Persons, describes this as “among the highest in the US”, meaning potential emigrants should be looking hard at the cost of living in Texas.
The famously oil-rich state has also recently begun charging electric vehicle drivers $200 (£158) a year to use its roads, with buyers of new EVs having to pay two years’ contributions up front.
"As more of these vehicles drive on Texas roads, there are concerns about how they contribute to the funding of the roads which they use," said Republican state senator Robert Nichols, sponsor of the new law, in September.
South Dakota is another state with no state income tax. But, with sales taxes at 4.2pc and local tax rates adding up to another 2pc, the cost of living in this midwestern state may not be as low as those hoping to shelter their wealth from the taxman may initially hope for.
In common with other low-tax states, South Dakota has no inheritance tax after local voters repealed it in 2001. The state has no capital gains tax either, meaning your investment income is not subject to any local deductions.
The state has been criticised by some for its financial secrecy laws, including the creation of perpetual trusts in 1983 – a financial vehicle sheltering money “that can remain untouchable for centuries, with no one ever paying inheritance tax on it”, as described by news website Axios.
Swiss-style banking secrecy laws also mean legal papers used to set up these trusts are kept sealed by the courts – that is, secret – and therefore outside the public domain.
As for other costs, cigarettes are otherwise taxed at $1.53 per pack of 20, with other products (such as loose rolling tobacco) being taxed at 35pc of the purchase price.
Petrol and diesel are both taxed at $0.28 per gallon, while drivers may have to pay up to $60 a year in “wheel tax”, an annual levy charged at up to $5 per wheel (capped at $60 maximum) and used to fund highway bridge maintenance.
Nevada prides itself on its low level of taxes.
As the home of gamblers’ paradise Las Vegas, the state models some of its legislation on famously business-friendly Delaware – meaning local politicians pride themselves on maintaining a broadly low tax environment.
“The State of Nevada does not impose an individual or business income tax,” says the Nevada Department of Taxation in its official communications.
The state has no inheritance tax nor capital gains tax, meaning your dividend income is not subject to deductions from the taxman – and you can pass on your wealth tax-free to others living in the state or in other US states with no inheritance taxes.
Potential expats should be aware that the cost of living in Nevada is relatively high thanks to its sales taxes, which the Tax Foundation estimates at 8.38pc across the board.
This consists of a 6.85pc state rate and local discretion for cities and municipalities to add up to an additional 1.53pc levy.
New Hampshire is another state with no state income tax or sales tax. The state also has relatively low property taxes.
However, its cost of living as estimated by the US Census Bureau is one of the highest among the low-tax states, coming in at just over $2,000 per month.
New Hampshire does charge capital gains tax on the estates of the deceased, although the lower threshold for this is $2m.
Businesses based in the state must account for this whenever dividends are distributed. Overseas dividends may be exempt, but you would need to check with a suitably qualified accountancy practice about whether this is the case.
Dividends are currently taxed at 4pc, with a lower-end cutoff of $2,400 (£1,900), rising to $4,800 (£3,800) for couples who file their taxes jointly in the state.
New laws passed last year mean taxes on interest and dividends are tapering out to 0pc over the next few years, however, with state legislators having voted to speed up a planned five-year phaseout period.
Stanley Rose of local accountancy practice Baker Newman Noyes noted in September: “Legislation passed this year accelerates that phaseout, causing the New Hampshire I&D tax to disappear completely [from] the year 2025.”