Advisers to the wealthy warn that many wealthy people are considering leaving the UK, amid expectations of tougher fiscal conditions after the general election and pessimism about the country’s prospects.
Several advisers told FT Money that more clients had become concerned about their tax situation since the Budget, when the Conservatives announced a move to scrap existing ones. no dom rules – a policy the party adopted from the Labor Party.
Chancellor Jeremy Hunt has pledged to end the 200-year-old tax regime that exempts foreigners living in Britain and domiciled abroad from paying British tax on foreign income and capital gains for up to 15 years. . This would be replaced by a new four-year system.
One adviser said she knew a client who packed his bags the day of Hunt’s announcement and left the country that night. “I think it was pretty dramatic,” she said. However, it underscores the sense of anxiety felt by many, she added.
Inquiries from non-dominant persons increased again after the Labor Party confirmed its plans to further limit tax exemptions (if elected) by removing the ability of non-dominant persons to protect foreign assets held in a trust from income tax. the Heritage.
The party, which leads in the polls, has also pledged to change the tax treatment of private equity executives and apply VAT to private school fees.
Ceri Vokes, partner at law firm Withers, said many private equity executives were also affected by the non-dom proposals and the VAT school fees policy.
Is this only a problem for private equity and non-mainstream managers?
In the last decade, more millionaires have left the UK than arrived, according to investment migration advisory firm Henley & Partners. The UK’s withdrawal from the EU was a factor, according to its research, and the UK suffered a net loss of 16,500 millionaires between 2017 and 2023.
“It’s not necessarily just about taxes, it’s about the atmosphere,” said Andrew Oury, a partner at the advisory firm Oury Clark. “It seems that Brexit opened a wound on immigration that has not yet healed.”
Another adviser said that for many planning to emigrate, it was “a general feeling that nothing works in the UK anymore, whether it’s the NHS, trains or even whether tap water is safe to drink”.
Others pointed to fear of a Labor government. “People are leaving because of the Labor Party,” said Miles Dean, head of international tax at Andersen, a tax adviser. “Taxes are clearly the key weapon they have and they are going to use them to lower the level.”
Where do the rich go?
Several countries emerge as popular destinations, including the United Arab Emirates, which do not charge personal taxes. The United States is another popular option. Oury said he was seeing much more interest from Brits looking to move there.
Law firm Withers has identified the most popular European options for potential UK emigrants as Italy, Greece, Portugal, Spain and Switzerland.
Both Greece and Italy charge a maximum tax of €100,000 (£84,000) a year, which advisers said was attractive to anyone earning more than about €250,000 a year.
Vokes said Italy had been particularly successful in attracting wealthy people in the seven years since it introduced its regime. The country had “shamelessly copied” the UK’s non-dom rules and improved on them.
“Italy is absolutely gaining at the expense of the United Kingdom,” he added. “People likes it [the tax regime’s] simplicity. You can explain it, you can understand it.”
Will there really be an exodus of the rich?
It is difficult to quantify the tendency of wealthy people to leave the UK. Helen Miller, head of tax at the Institute for Fiscal Studies, said she had not seen any “credible evidence” of an exodus.
“You can always find an advisor who has a client leaving the country,” he said. “The question we would like to know the answer to is how many people are leaving more than usual?”
“I’m not aware of a rush out the door,” added Clare Munro, tax adviser at Weatherbys Private Bank. She said some of her non-dominant clients were checking their location, but they tended to be people with “shallow roots in the UK and homes in several countries”, so changing residences was not difficult.
“But many UK-based billionaires don’t have that flexibility,” he added. “They may be older, they have houses and land here passed down from generation to generation and they have families. For them, the tax regime would have to be much stricter to justify such a significant disruption.”
Not all millionaires agree that taxes are the only determinant of the decision about where to live.
“There is a lot of bluster that comes from the wealth advisory sector, which has a vested interest in fighting for the best interests of its clients,” said Graham Hobson, founder of Photobox, a photo printing company that acquired Moonpig and then sold it for a reported price. 400 million pounds.
“I am a rich person and I will not leave, as many others will not,” he said. “People have lives, they love culture, communities and all the good things the UK has to offer, even now.”
If the rich flee, what is the economic impact?
Vokes said that while non-dominants and private equity executives were a “small” part of the population, they contribute a huge amount both in taxes and in other areas such as business creation, employment and consumption.
“This is a group that we should consider really valuable and we should try to retain,” he added.
Miller said: “Yes. [policymakers] “If we knew that by raising taxes we would lose a lot of money because people would leave, that wouldn’t be a particularly smart move,” he added.
However, Arun Advani, an assistant professor at the University of Warwick, who has studied the fiscal response of non-dominants to previous reforms, said he found that people who responded more to tax increases and left the country had fewer economic connections. with the United Kingdom. .
“They don’t have much income in the UK and they don’t pay much tax in the UK, so it costs them less if they leave,” he said.