The exodus of wealth from Britain has accelerated since the turn of the year, fuelling fears that the abolition of the non-domiciled tax regime will wipe billions of pounds from the economy.
Inquiries about moving overseas were nearly three times higher in the first three months of this year compared with the same period last year, claims Henley & Partners, which offers global relocation services.
The company said the exodus was being led by non-doms before their privileged tax status ends this weekend. But wealthy entrepreneurs were also heading for the exit.
From Monday, most non-doms will have their worldwide earnings subject to UK tax for the first time after Labour announced changes last year.
A new analysis based on an updated assumption about the numbers leaving predicts the policy will cost the economy more than £10 billion a year.
Modelling by the Adam Smith Institute, a free-market think tank, estimates the tax change will lead to the loss of 44,000 jobs and £111 billion of growth by 2035.
Henley & Partners reported that re-location inquiries since the new year had been 49 per cent higher than the previous three months and 183 per cent higher than the same period last year.
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Portugal, St Kitts and Nevis, Spain, Greece, the United Arab Emirates and Italy were popular destinations.
Peter Ferrigno, a director at Henley & Partners, said: “Clients are leaving. Not only non-doms but also UK nationals in anticipation of a business sale. These wealthy people are not being replaced.”
Last year was already a record year for wealth migration, with Britain losing a net 10,800 dollar millionaires, more than any other country except China. The scale of the exodus is sure to alarm the Treasury, which predicted that ending the non-dom regime would generate £3 billion a year in tax revenue over the course of this parliament.
The Adam Smith Institute believes half the 21,100 non-doms who were paying the £30,000 annual fee for their tax status will leave. It expects the exchequer will lose £500 million from the policy next year.
Maxwell Marlow, a director at the think tank, said: “Fewer non-doms will mean reduced investment, a lower tax take, worse public services and fewer jobs. Considering the government’s fiscal planning has been based on the assumption that abolishing the non-dom status will raise money, this could create a serious hole in UK finances.”
The change is already being keenly felt in the luxury property market. House prices across central London have fallen by up to 5 per cent over the past 12 months, with Marylebone, Knightsbridge and Belgravia recording the steepest declines.
Paul Finch, a director at Beauchamp Estates, said offers and sales had fallen.
“Normally, we would expect to see between 10 to 30 per cent of the homes listed for sale in central London going under offer over a typical quarter.
“If you look at the data from LonRes, up to the end of March only 2 per cent of houses priced between £10 million to £25 million are under offer and 3 per cent of those priced above £25 million.”
It was disclosed this week that Lakshmi Mittal, 74, was considering leaving. The steel tycoon, who has lived in Britain for three decades, is said to have told colleagues he will move because of the government’s tax plans, which will subject current non-doms’ overseas assets to UK inheritance tax (IHT) for the first time. The Indian-born businessman and his family are worth an estimated £14.9 billion.
Some tax advisers believe most non-doms who might leave have already gone but some fear the exodus of wealth will accelerate.
Nigel Green, the chief executive of deVere Group, the financial advisory firm, said: “We saw a surge in [relocation] inquiries from high net worth individuals after the budget — and we fully expect another wave now.
“The UK’s tax burden is on track to hit a record 37.7 per cent of GDP by 2027-28. Worse still, the Office for Budget Responsibility warned that the chancellor faces a 50-50 chance of needing to impose yet more tax hikes just to remain within her fiscal rules.
“The writing is on the wall. Wealthy people are looking at the government’s agenda — capital gains, inheritance, pensions, employer contributions and moves to abolish non-dom status — and they’re making plans.”
Lobbying efforts for a change of course are intensifying. The Times understands that Foreign Investors for Britain, which represents the wealthiest non-doms, has been promised further meetings with No 10. Sources close to the Treasury have not ruled out a last-minute change of plans. The group is calling on the Treasury to copy President Trump’s “Golden Visa” for foreign investors, with the cost of entry and the right to remain in the UK determined on a sliding scale by wealth.
It says those with up to £100 million should be charged £200,000 a year while those with more than £500 million are charged £2 million.
Leslie MacLeod-Miller, the group’s chief executive, said: “Foreign investors are not adversaries but wealth generators capable of revitalising the economy. Policymakers should reconsider punitive tax measures and adopt innovative solutions.”
Rachel de Souza, a tax partner at RSM UK, the accountancy firm, said the worst of the non-dom exodus was over and most British entrepreneurs would ultimately choose to stay.
She said: “Entrepreneurs were quite shocked by the recent tax changes and lots of our clients were saying: ‘We’re going to move abroad.’ But when you start to talk to people about the practical challenges, it becomes more real.
“Clearly, some people are happy to take that step. But I think it’s not practical for the vast majority, until perhaps such time as their business is about to be sold. Yet the budget tax changes have triggered a lot of IHT planning by those who are staying.”
The Treasury said it did not recognise the figures from the Adam Smith Institute. A spokesman added: “Replacing the outdated non-dom tax regime with a new internationally competitive residence-based system addresses unfairness in our tax system, attracts the best talent and investment to the UK and ensures that everyone who is a long-term resident in the UK pays their taxes here.”
