Non-doms preparing to leave UK over Labour’s plans
Labour’s plans for further reforms to the non-dom rules are forcing many high-net-worth individuals to consider leaving the UK for good, says the CEO of one of the world’s largest independent financial advisory and asset management organisations.
The comments from Nigel Green of deVere Group, which specialises in cross-border financial advice, comes as Labour leader Sir Keir Starmer is forecast to be heading to Downing Street with the biggest majority for 100 years after the July 4 general election.
In the Spring Budget, Jeremy Hunt, the current Conservative chancellor, made a surprise announcement to scrap the 225-year-old ‘non-domicile’ regime.
‘Non-dom’ describes a UK resident whose permanent home – or domicile – for tax purposes is outside the UK. A non-dom only pays UK tax on the money they earn in the UK. They do not have to pay tax to the UK government on money made elsewhere in the world.
Nigel Green says: “Labour, which is looking likely to win a landslide victory, has signalled that they will roll out further restrictions on the non-dom regime.
“This is fuelling enquiries from high-net-worth individuals who are actively considering leaving the UK for a more tax friendly jurisdiction and who are, therefore, seeking cross-border financial advice.
“There are many locations all over the world which are crafted to appeal to affluent individuals, typically using straightforward planning strategies. These wealthy people are internationally mobile, many already own a second home abroad, so what’s to keep them in Britain?
“The most popular alternative, lower-tax destinations include Spain, Italy, Switzerland, Malta, Dubai and Singapore.
Among other proposals, Labour has indicated plans to reduce the generosity of transitional reliefs, specifically by removing the proposal that existing non-doms would only be taxed on 50% of their foreign income in the first year of the new system.
The most notable proposal is that trusts created by non-doms will no longer protect non-UK assets from inheritance tax, regardless of when they were established. It appears this rule would apply even to trusts set up before the settlor became a UK resident, though these trust assets might remain exempt until the settlor has been a UK tax resident for 10 years.
While the exodus may be a boon for these global destinations, the potential fallout for the UK is a topic of concern.
Nigel Green said at the time of the Budget: “The expected departure of high-net-worth individuals could result in a reduction of tax revenues, impacting public services and infrastructure development.
“Furthermore, the UK has long benefited from the economic contributions of non-doms, whose direct and indirect investments and business activities have been integral to the nation’s prosperity.
“Additionally, the potential decline in the UK’s reputation as a tax-friendly hub may dissuade future investors and entrepreneurs from considering the country as their base of operations.
“The allure of the non-dom tax status has been a pivotal factor in attracting international talent and creating a dynamic business environment.
“Its removal could signal a shift in the global perception of the UK as a favourable destination for wealth creation and business development.”
The deVere CEO concludes: “The very real possibility of Labour winning the UK election is driving high-net-worth individuals to prepare to leave Britain.”
