Trump Accounts for American Children Living in the UK: How the Tax Works on Both Sides

Short answer

Trump accounts are a new kind of US savings account for children, created by the 2025 tax law. They could be opened and funded from 4 July 2026. The child must be a US citizen with a Social Security number. Children born from 2025 to 2028 can also get a one-off $1,000 government deposit. In the US, the account grows without tax until the child turns 18, when it starts to behave like an IRA. For a family living in the UK, the US benefits are only half the picture. The UK has not said how it treats these accounts. UK tax on a UK-resident child, and on parents who fund the account, can apply in ways the US rules do not.

Key points

• The child must be a US citizen under 18 with a Social Security number. The account is opened with IRS Form 4547 or through trumpaccounts.gov.
• The $1,000 pilot deposit is for US citizen children born after 31 December 2024 and before 1 January 2029. It must be elected when the account is set up.
• Family contributions are capped at $5,000 a year for 2026 and 2027, with indexing after that. Employers can add up to $2,500 per employee within that cap.
• The money must be invested in low-cost US equity index funds. Annual fees are capped at 0.1%.
• Nothing can be withdrawn before the year the child turns 18. After that, IRA-style rules apply, including the 10% early withdrawal penalty with its usual exceptions.
• On the UK side, there is no published HMRC guidance on these accounts yet.

The US tax position

Contributions are not taxable income to the child while the account is in its growth period. The $1,000 pilot deposit, gifts from governments or charities, and employer contributions do not give the child tax basis. Contributions from family members do, which matters when money comes out later. Contributions do not stop the child also having a regular or Roth IRA later on.

For parents, the US side is fairly simple. Family contributions are not deductible. The account is a US account, so it does not go on the child's FBAR.

The UK questions for families living here

This is where families in Britain need to be careful. None of these points are settled by HMRC guidance, so treat them as risks to weigh, not conclusions.

Is it a pension, a trust or simply an investment account? UK pension treatment under the US-UK treaty is given to specific US plans. A Trump account becomes IRA-like only from age 18, and it is new, so treaty pension protection cannot be assumed. If the UK sees it as an ordinary investment account held for the child, income and gains inside it may be taxable in the UK year by year.

The parental settlement rule. When a parent gives money to their own minor child, and that money produces more than £100 of income in a tax year, the UK can tax the income on the parent. This is a long-standing anti-avoidance rule. Contributions from grandparents and others are not caught by it in the same way.

US funds and UK "reporting fund" status. The account must hold US index funds. Most US funds do not have UK reporting fund status. For a UK taxpayer, gains on non-reporting funds are generally taxed as income, not capital gains, when they are realised. Paperwork is lighter than for some UK products, but the rate can be higher.

The $1,000 pilot deposit. Whether the UK would tax a government deposit as income of the child is not clear. Most families will find any amount small, but it should still be considered when the return is prepared.

How this fits with other savings for children

Families in the UK often compare Trump accounts with Junior ISAs and 529 plans. Each has a different US and UK profile. A Junior ISA is tax-free in the UK but is a foreign account with possible PFIC issues for a US citizen child. A 529 plan is tax-advantaged in the US but not in the UK. A Trump account is tax-deferred in the US with an uncertain UK position. We can set out the tax treatment of each option for your family. Choosing between them, and deciding how the money is invested, is a matter for you and your financial adviser. TaxStone is not authorised by the FCA and does not give investment advice.

What we can help with

If your family already has a Trump account, or is thinking of opening one, we can make sure it is reported correctly on the US and UK returns that need it. That includes the parent's return where the settlement rule applies. Please tell us about every source of income in the household, in both countries, so nothing is missed. We work entirely by email, so the reasoning on uncertain points is written down and dated.

Sources

• One Big Beautiful Bill Act (Public Law 119-21), new Internal Revenue Code sections 530A and 6434
• IRS guidance on Trump accounts and Form 4547 (Elections to open a Trump account and receive the pilot contribution)
• Treasury and IRS, trumpaccounts.gov guidance
• US-UK Income Tax Treaty (2001), Article 17
• HMRC, Trusts, Settlements and Estates Manual TSEM4300 onwards (settlements on minor children, £100 rule)
• HMRC, Offshore funds manual, reporting and non-reporting funds (OFM)