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British citizens, either born in America or to American parents, have been dealt a blow after a large wealth manager withdrew its services to 'US tax residents'. 

Nutmeg, which has more than 140,000 clients, emailed affected customers last month, warning them it was closing their accounts. 

The term 'US tax resident' includes people who live in the UK but were born in the US, and those who may never have set foot in the US, but have American parents. 

Blow: Nutmeg, which has more than 140,000 clients, emailed affected customers last month, warning them it was closing their accounts

Nutmeg told The Mail on Sunday it was pulling out from providing Isas, pensions and investment accounts to about 350 people due to 'legal and regulatory complexities'. 

The US is the only country in the world besides Eritrea that taxes non-resident citizens on their global income. The Foreign Account Tax Compliance Act (Fatca), introduced in 2010, requires institutions to report the financial details of all their American clients – or risk being hit with large fines. 

Nutmeg was one of the few remaining wealth managers offering accounts to US citizens living in the UK. In 2018 it stopped accepting US tax residents as new customers, but continued to service existing accounts. Now, though, it has also pulled the plug on these existing customers. The wealth manager said it was a 'very difficult decision' and was helping clients find an alternative investment provider.

It added that any customers who have renounced their US citizenship should get in touch about keeping their investments with them. 

Nutmeg clients have reacted angrily to the news. Daniel Duckett, a pastry chef in Belfast – and a US tax resident – tweeted: 'I've been with Nutmeg for four years and suddenly they decide to stop me being a client. Why are banks able to discriminate in this way and get away with it? And what's nuts? The parent company is none other than US-based JPMorgan and [Nutmeg] recently embraced Fatca to attract more expats.' 

JPMorgan Chase bought Nutmeg in June as part of its expansion into the UK banking and investment market. In 2016, Nutmeg declared it would accept US citizens living in the UK as clients. 

Another customer, who wished to remain anonymous, said she was 'very surprised' to receive the email from Nutmeg. The woman, who lives in the UK and has British and American nationality, opened a lifetime Isa with Nutmeg in 2017 as part of her retirement plan. 'It seemed the best option for me as I'm self-employed,' she said. 'I liked the fact that the Government put £1,000 in for every £4,000 I put in,' she said.  

However, she now feels 'back at square one' and doesn't know how best to save for her retirement. She describes living in the UK with American citizenship as 'a minefield' due to the tax rules.

The US taxes people based on their citizenship rather than residence. Even green card holders, and socalled accidental Americans – those born in the US but who left as babies or toddlers – do not escape the reach of the Internal Revenue Service (IRS), America's taxation authority. 

Boris Johnson, who was born in New York but left when he was aged five, gave up his American citizenship after the US tried to tax him on the sale of his home in Islington, North London, in 2014 – a move he described at the time as 'absolutely outrageous'. 

Those deemed to be US tax resident are liable for tax in America, regardless of where they live, and where the money is earned. A double tax treaty means people won't be taxed twice, for example if they pay income tax on their earnings here, they won't have to pay a second lot of tax to the IRS. 

However, it means that while Isas are tax-free in this country, they will be subject to tax on the other side of the Atlantic. 

Alex Straight, a partner at accountant Blick Rothenberg, explained: 'The US won't care that your investments are wrapped up in a stocks and shares Isa.

'It just sees it as an investment account that you hold overseas and will tax you on it. This tax burden creates a real headache for Americans living here.' 

According to Straight, investors holding certain funds in their Isas could be subject to punitive amounts of tax: 37 per cent plus interest depending on how long the investment has been held.