The U.K. government has reached a final decision on the tax treatment of carried interest, with new legislation to implement fundamental changes from April 2026. The new regime is the product of a consultation process which began with the budget issued by the U.K. government in October 2024. Industry engagement with the consultation process has successfully averted some of the more onerous aspects of the original proposals. Notably, the new regime will not require a “minimum co‑investment,” as had been initially proposed. The rules will, however, only offer beneficial tax treatment for carried interest derived from long-term investments. That change will bring complexity for the industry, and the rules will not apply to all investment strategies in the same way. In a guest article, Fried Frank partner Oliver Currall describes the U.K.’s new carried interest regime, with particular emphasis on how the calculation of relevant investment holding periods will apply across different investment strategies and affect investment funds’ ability to qualify for beneficial U.K. tax treatment. The article also identifies some specific concerns the new rules present for PE sponsors, as well as for executives who live or spend time working in the U.K. For Currall’s insights on the previously proposed U.K. tax reforms, see “U.K. Carried Interest Taxation: Increased Rates and Complexity Introduce Uncertainty for PE Sponsors” (Dec. 12, 2024).