Trump / §530A Accounts

The One Big Beautiful Bill Act 2025 introduced new §530A accounts, commonly referred to as “Trump Accounts” (see https://trumpaccounts.gov/). Below is a brief summary of the key features and the US and UK tax consequences.

These accounts are similar to an IRA but are designed for children. To be eligible, a child must have a Social Security Number and be under the age of 18 on 31 December of the year the account is opened.

Up to $5,000 per child per year may be contributed. Additional contributions may be available from certain government entities and charitable organisations, and these do not count towards the $5,000 annual limit. The Federal Government has indicated that it will contribute $1,000 to each account for children who are U.S. citizens born between 1 January 2025 and 31 December 2028. The first contributions cannot be made until 5 July 2026.

The funds in a Trump account may be invested in certain eligible investments, generally stock index funds or ETFs whose underlying securities are composed predominantly of US-based companies.

Generally, no withdrawals are permitted until the year the child turns 18. From 1 January of the year the child turns 18, the account is subject to most of the same contribution and withdrawal rules that apply to traditional IRAs. This includes the 10% additional tax on early distributions prior to age 59½ unless an exception applies (for example, certain higher education expenses or a first-time home purchase). Distributions allocable to basis are not included in gross income, but earnings and other amounts in excess of basis are taxable when withdrawn. In other words, the account is tax-deferred for US purposes rather than tax-free.

UK Tax Considerations

Although these accounts benefit from US tax deferral, HMRC are unlikely to regard them as tax-free for UK residents, particularly where contributions are made while the child is UK resident.

It is currently unclear whether HMRC will treat a §530A account as a “foreign pension scheme” for UK tax purposes. Traditional IRAs are often treated as foreign pension schemes, but the ability to access §530A funds from age 18 may weaken that analysis. In the absence of specific guidance, a prudent assumption is that full pension-style treatment may not be available.

In many cases this may not create a significant issue, as children are entitled to a UK personal allowance and may have little other income. However, there are potential adverse consequences:

If a child has more than £100 per year of investment income arising from gifts made by a parent, all of that income (not merely the excess over £100) is treated as taxable income of the parent. This rule applies to unmarried minor children and applies to income rather than capital gains. It does not apply to contributions made by grandparents or others.

Unless the underlying funds are HMRC reporting funds, gains realised on disposal may fall within the UK offshore funds regime. In broad terms, this can result in gains being taxed at income tax rates rather than capital gains tax rates.

Depending on how the account is classified for UK purposes, income and gains may be taxed annually or on distribution.

Cross-Border Planning Observations

From a US/UK cross-border perspective:

These accounts are unlikely to be UK-tax efficient vehicles.

They are primarily US-centric retirement wrappers.

They may be inferior to UK pension planning if the child is expected to remain UK resident long term.

They may be more attractive if the child ultimately becomes US resident.

Contributions by grandparents or other non-parents may mitigate UK settlement rule exposure.

As with most cross-border arrangements, the suitability of a §530A account should be considered on a case-by-case basis.