Image caption: President Trump Delivers Remarks at Business Session with Nation’s Governors/Image source: The White House
With Donald Trump’s “big beautiful” tax bill narrowly approved by the House, promising significant tax cuts for middle-income Americans and ambitious spending on immigration enforcement, how does this sweeping US fiscal overhaul stack up against the UK’s tax system, healthcare provisions, and national debt?
The US House of Representatives has approved President Donald Trump’s ambitious tax and spending legislation by a razor-thin margin of 215-214 votes. This marks a significant early victory for the newly inaugurated president’s domestic agenda, according to news reports.
The bill, dubbed by President Trump as the “One, Big, Beautiful Bill”, seeks to extend tax cuts from his first presidency while delivering what the White House claims will be “the largest tax cut in history.”
However, the legislation faces fierce Democratic opposition and significant hurdles in the Senate, where Republican lawmakers have already signalled they want to make changes.
A White House statement said the bill prevents the “greedy death tax” from hitting two million family-owned farms that would otherwise see their exemptions cut in half and cuts taxes on farmers by over $10 billion.
The bill also claims it will increase onshore and offshore oil and gas leases, which should “spur job growth, make energy more affordable, and make America less dependent on foreign adversaries.”
How does the UK tax situation stack up to Trump’s bill?
The US legislation promises substantial tax relief for middle-income Americans, with those earning between £24,000 and £64,000 (approximately $30,000-$80,000) set to see their tax bills reduced by 15% next year, according to a White House statement.
The White House projects that a typical family with two children could see their take-home pay increase by up to £10,600 ($13,300). The White House statement said, “Raising wages. American workers will see wage increases of up to $11,600; a typical family with two kids will see take-home pay rise by up to $13,300.”
The bill also aims to eliminate taxes on tips and overtime pay. Such measures would be welcome to those working in the UK hospitality sector.
In the UK, you must pay Income Tax on any tips you get, and may have to pay National Insurance.
Who reports the tax and whether you pay National Insurance depends on:
- How the customer paid the tip
- How tips are managed at your workplace
UK legislation states that any amount paid to an employee which is a payment ‘of a gratuity’ or is ‘in respect of a gratuity’, is exempt from National Insurance contributions if it meets either of the following 2 conditions:
- It is not paid, directly or indirectly, to the employee by the employer and does not comprise or represent monies previously paid to the employer, for example, by customers
- It is not allocated, directly or indirectly, to the employee by the employer
By ‘allocated’, HMRC means deciding who should receive what amount through tips. Whether either of the conditions apply will depend on the facts.
However, HMRC states: In most cases where an employer will pass tips to an employee, you are liable for both employer and employee National Insurance contributions because neither of the 2 conditions are satisfied.
Perhaps most notably for British observers, the US legislation cuts taxes on Social Security benefits for the older people. This contrasts sharply with the UK system, where the state pension is subject to income tax, though pensioners receive a higher personal allowance.
Border security and immigration measures
Beyond tax cuts, the bill allocates substantial funding for Trump’s immigration enforcement agenda, including money for “at least one million illegal immigrant deportations per year” and thousands of miles of new border barriers. The legislation also ends Medicaid benefits for an estimated 1.4 million undocumented immigrants.
This approach differs markedly from the UK’s National Health Service, which provides free healthcare regardless of immigration status, though recent governments have introduced some charging mechanisms for certain services.
The US legislation’s price tag
The legislation comes with an enormous price tag that would be unprecedented in UK terms. Estimates suggest it will add $5.2 trillion (£3.9 trillion) to US national debt, according to the BBC.
To put this in perspective, the UK’s entire public sector net borrowing was around £140 billion in 2023-24. Yet higher estimates exist.
The House of Commons Library reported public sector net borrowing of £131 billion in the financial year 2023/24, while the OBR forecast £127.5 billion for the financial year ending March 2025. The Office for National Statistics (ONS) has also provided figures for April 2025 and year-to-date borrowing for FYE 2025, which would put the cumulative figure for 2023-24 in a similar range.
Yet, the White House reported the bill is “reversing runaway spending” and will deliver according to commentators $1.6 trillion in “mandatory savings” — “the most in U.S. history and the largest deficit reduction in nearly 30 years,” according to the Official Rapid Response account of the Trump 47 White House.
The US bill has fundamental differences from Great Britain’s approach to taxation. While the US is moving toward eliminating taxes on tips and overtime, the UK maintains a more comprehensive tax base where most income sources are subject to similar rates.
The UK’s progressive tax system currently has basic rate (20%), higher rate (40%), and additional rate (45%) bands, alongside National Insurance contributions. In contrast, the Trump bill aims to simplify and reduce tax burdens across the board, particularly for middle-income earners.
British taxpayers also benefit from universal healthcare through general taxation, whereas Americans face the complexity of employer-provided health insurance and programmes like Medicaid, which the bill seeks to restrict for certain groups.
Senate challenges ahead
Despite the House victory, the legislation faces significant obstacles in the Senate, where several Republican senators have indicated they want to modify the bill. Speaker Mike Johnson described it as “generational, nation-shaping legislation,” but the narrow House margin suggests the political path forward remains uncertain.
Democrats have mounted fierce opposition, warning that the cuts could force hospital closures and nursing home shutdowns. “Hospitals will close, nursing homes will shut down and communities will suffer,” Democrats said in a joint statement, according to the BBC.
The bill’s progression through the Senate will be closely watched internationally, as its passage would represent one of the most significant shifts in American fiscal policy in decades, with potential ripple effects for global markets and trade relationships, including with the UK.
Trump celebrated the House victory, declaring “there is no time to waste” before urging the Senate to act swiftly on the legislation.
