The number of wealthy Britons looking to move abroad has surged since Labour’s election victory as fears grow over the scale of the chancellor’s impending tax raid on high earners.
One company offering relocation services to high net-worth individuals experienced a 69 per cent jump in inquiries in August compared with the same month last year.
Wealth managers say concern over the government’s tax plans in the autumn budget are prompting the demand, with plans to make non-doms’ global wealth subject to UK inheritance tax “the final nail in the coffin” for many.
Sir Keir Starmer has warned that there will be tax rises and that “those with the broadest shoulders should bear the heavier burden”.
Uncertainty over tax changes is also having a severe effect on Britain’s high-end property market, with the number of transactions slumping as wealthy buyers delay in committing to the UK.
The government is understood to be looking at a range of possible tax rises, including an increase in capital gains tax (CGT) and a reduction in pension tax relief for top earners.
Chris Etherington, a tax partner at RSM, an audit and tax consultant, said his company was experiencing a surge of inquiries from wealthy Britons. “People are re-evaluating their lifestyles and whether this is the [right] place to live,” he said.
Tax advisers say they have also experienced a “massive uptick” in activity as entrepreneurs look to sell or transfer assets before the budget, in the hope of minimising their CGT exposure.
Kim Klahn, a corporate tax partner at Clarke Willmott, the law firm, said: “I’ve had phone calls [where the clients have said]: ‘If I don’t get it done by October 30, this could potentially affect my whole retirement planning.’”
The latest analysis suggests Britain is on track to lose a record 9,500 millionaires this year — more than any other country in the world except China.
Henley & Partners, which helps wealthy investors move overseas, says the UK suffered a net loss of 4,200 millionaires in the first five months of the year, with a further 5,300 expected to go before the end of the year. Most are choosing Dubai as a destination, although Switzerland, Portugal, Italy and Cyprus are also popular.
Stuart Wakeling, director of the company’s London office, said: “Lots of people may be happy about the change of government but we have seen a spike of people since the election who want to hedge their bets or have a ‘plan B’.
“There are always a number of factors driving people to move abroad but tax is one of the big ones this year. Others are concerned with the way the UK is going with crime and terrorism. They want something safer and quieter. Some just want a change in lifestyle or better weather.”
Peter Ferrigno, the director of tax services at Henley & Partners, added: “There has been a lot of talk about the small boats crossing the Channel but no one is looking at the private jets going the other way. I call it the small planes problem.”
Should the prediction prove correct, it will mean that Britain will lose four times more millionaires this year than Russia, Brazil and South Africa combined. Russia is at war with Ukraine, Brazil recently elected a hard-left leader who has served prison time for money laundering, and South Africa is beset by crime.
Only China is set to lose more millionaires than Britain, with a net loss of 15,200 this year as the country’s economy struggles to escape a property crisis and the effects of the pandemic.
Alec Marsh, the former editor of Spear’s, the wealth management magazine, said: “Unfortunately, since the Brexit referendum in 2016, Britain has had the reverse Midas touch, struggling to retain its place at the top table for attracting global wealth.
“While many of our fundamentals remain unchanged — the basics such as the English language, the rule of law, time zone and so on, there is a swathe of disincentives for the wealthiest and most globally mobile, of which the non-dom changes are the final nail in the coffin.”
He added: “When it comes to the internationally wealthy, Britain is closed for business.”
HM Revenue & Customs says there are 74,000 non-doms in the UK, and 37,800 of them pay a £30,000-a-year fee to keep this tax status, after being resident in the country for more than seven years.
Analysis by Warwick University and the London School of Economics suggests non-doms have at least a combined £10.9 billion in offshore income and gains that are not subject to British tax.
The latest figures from HMRC show that the 37,800 non-doms paying a fee for their status contribute £6.5 billion a year in income tax, national insurance and capital gains on their UK income and assets — the equivalent of more than £170,000 each — and that is without considering the VAT they pay on their spending.
• The Times view on Labour’s tax plans: Wealth of Nations
In March, the Conservative government vowed to limit these tax breaks by reducing the time before non-doms have to start paying tax on their overseas income from 15 to 4 years. The move was expected to raise about £3 billion a year.
Since being elected, Labour has pledged to extend this crackdown by subjecting non-doms’ assets held overseas to UK inheritance tax if they have lived in Britain for more than ten years. The chancellor said this decision — along with plans to remove the discount non-doms get on foreign income brought into the UK — would raise a further £2.5 billion a year.
However, analysis by the consultancy Oxford Economics suggests that rather than generating money, the plans could result in a £900 million-a-year loss for the Exchequer.
It says that in a best-case scenario the proposals will result in 5,000 non-doms leaving the UK over the next five years, meaning the changes will raise only £1.3 billion a year. However, in a worst-case scenario nearly 25,000 will leave, meaning the policy will result in the taxman losing £900 million a year.
There are also concerns that a large increase in CGT, such as aligning the rates with income tax, which would raise the tax from between 20 to 28 per cent to 40 to 45 per cent for top earners, could also lower Treasury revenues.
RSM UK points out that HMRC’s projections estimate that raising the higher CGT rate by ten points would lead to a £2.025 billion drop in revenue by 2027-28.
Research shared with The Times also suggests that more than half of Britain’s entrepreneurs would consider leaving the UK to avoid higher CGT.
The poll of company founders by the entrepreneurs network, Helm, found that 60 per cent would look into relocation if Labour increased the rate for selling a business.
Leslie Macleod Miller, the chief executive of Foreign Investors for Britain, which commissioned the Oxford Economics report, said: “If mishandled, these [tax] changes could severely undermine the UK’s ability to attract and retain global talent and investment, and risks the government failing to fund its key public policy spending commitments as outlined in the manifesto.”
The uncertainty over taxes is also hitting London’s prime, and in particular, super-prime property markets, according to estate agents.
The number of deals this year for homes worth at least £5 million is down 10 per cent on the same period in 2023, according to the data company LonRes. The slowdown also appears to be accelerating, with year-on-year transactions down 19 per cent last month.
Paul Finch, a director at Beauchamp Estates, said: “In 2023 ultra-wealthy buyers purchasing homes in London were acquiring large ‘main residence’ houses and mansions in the £25 million to £40 million plus price range and there were several purchases for mansions priced over £100 million in Regent’s Park and Mayfair.
“This year the highest demand and majority of sales have been in the £15 million to £25 million price range, driven by American and Middle East buyers who have been purchasing spacious pied-a-terre apartments ideal for occasional stays.”
However, with many of the wealthiest buyers sitting on their hands, there has been a boom in the super-prime lettings market.
Gary Hersham, of Beauchamp Estates, said: “The market has been boosted by the uncertainty generated by the general election, which has led some people looking to buy to decide to pause and rent instead until they have certainty about the new Labour government’s taxation policies, awaiting the October autumn budget.”
Landlords are among those investors rushing to sell. Property investors have been squeezed by higher interest rates, stricter regulation and higher taxes in recent years and many see a looming CGT increase as the final straw.
A spokesman for the Treasury said: “Following the spending audit, the chancellor has been clear that difficult decisions lie ahead on spending, welfare and tax to fix the foundations of our economy and address the £22 billion hole the government has inherited. Decisions on how to do that will be taken at the budget in the round.”
