The tax landscape for fund managers working in the UK has completely changed in the last year. Draft legislation published in December 2015 (introducing new ITA 2007 Part 13 Chapter 5F) sets out the final piece in the jigsaw, the new ‘income-based carried interest’ rules, which will apply to relevant sums arising to fund managers on or after 6 April 2016. Where they apply, these rules will result in sums arising to investment managers which are ‘income-based carried interest’ being taxed as trading income. The basic rule uses a weighted average investment holding period test to determine whether, and to what extent, carried interest amounts should be taxed as income. The basic rules are easy to understand at a conceptual level, but are far from straightforward to apply in practice.