ARTICLE
July 1, 2026
Read time: 4 min
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As part of London Hot Topics 2026, Nick Fagge and Elizabeth Spencer explored some of the most significant tax developments affecting investment managers and discussed what recent reforms tell us about the UK’s continued commitment to supporting the asset management industry.
Over the past year, investment managers have closely monitored a series of tax developments that have prompted questions about the UK’s long-term competitiveness as a global asset management hub.
While several of the changes have attracted significant attention, the overall message emerging from recent reforms is clear: the UK continues to position itself as an attractive jurisdiction for investment managers, even as it seeks to modernise and refine its tax framework.
The challenge for managers is understanding where simplification has occurred, where complexity remains and how best to position themselves for the future.
Carried interest reforms: evolution rather than revolution
The changes to the taxation of carried interest have undoubtedly been among the most closely watched developments in the sector.
While the new rules represent a significant structural shift in how carried interest is taxed, the practical impact may be less dramatic than many initially feared.
The new regime moves away from treating carried interest as a capital gain and instead taxes it as the profits of a deemed trade. However, qualifying carried interest continues to benefit from favourable treatment, meaning that the effective tax burden remains broadly comparable to previous arrangements for many managers.
The more significant change may be operational rather than economic. Managers will need to pay closer attention to holding periods, reporting obligations and the application of the new qualifying tests.
Simpler rules for investment managers
One of the more welcome developments has been the simplification of the Investment Manager Exemption (IME).
Historically, the regime contained a number of complex requirements that often created administrative burdens without necessarily serving a clear policy objective.
Recent reforms have removed some of these complexities, including the abolition of the long-debated 20% test and changes to the treatment of qualifying investment transactions.
For many managers, these changes should provide greater certainty and flexibility while reducing the need for detailed monitoring and record-keeping.
International businesses should remain vigilant
While the broader direction of travel is positive, managers operating internationally will still need to navigate a range of practical considerations.
The new carried interest rules place greater emphasis on where investment management activities are performed, creating additional considerations for internationally mobile teams and individuals operating across multiple jurisdictions.
Managers should ensure that they maintain appropriate records and understand how cross-border working arrangements may affect their tax position.
As businesses become increasingly global, workforce mobility continues to be an area requiring careful attention.
A more supportive environment, but not a lighter touch
An important theme emerging from the recent reforms is that support for the industry does not necessarily mean less scrutiny.
While policymakers appear committed to maintaining the UK’s attractiveness as a centre for investment management, managers should expect continued focus on transparency, reporting and compliance.
The proposed registration requirements for certain tax advisory activities serve as a reminder that simplification and oversight are likely to continue side by side.
For managers, this means maintaining robust governance and documentation processes even as certain rules become easier to navigate.
Looking ahead
The UK asset management industry remains one of the country’s great success stories and recent developments suggest that policymakers recognise its importance.
While managers will need to adapt to a number of new rules, the overall direction of travel points towards a more practical and competitive framework that supports investment management activity while preserving appropriate safeguards.
The result is a regulatory and tax environment that continues to evolve, but one that remains firmly open for business.
Continue the conversation
If you would like to discuss any of the issues highlighted above, please reach out to Nick Fagge, Elizabeth Spencer or your usual McDermott contact.
