‘Fewer nom-doms left than feared' after Rachel Reeves's budget
In April, the government abolished the centuries-old non-dom tax regime, which allowed wealthy foreigners living in the UK to shelter their worldwide assets from British taxes for an annual fee starting at £30,000.
The Office for Budget Responsibility (OBR), the government's fiscal watchdog, had said that up to a quarter of non-doms would leave Britain in response to the changes.
Knightsbridge in London is a hotspot for non-doms — a UK resident whose permanent home, or domicile, is for tax purposes outside the country
DARKO MLINAREVIC/GETTY IMAGES
There have been fears of a broader exodus. One survey suggested that Britain lost more millionaires to migration last year than any other country except China.
But initial payroll data reported by the Financial Times suggested that the reaction from the wealthy to the tax changes has been in line with, or even below, the OBR's forecast. One Reeves ally told the newspaper: 'We've seen no evidence that there's been a change in the non-dom profile beyond what the OBR forecast.'
However, it is thought that HMRC will not have a full understanding of exactly how many have fled the reforms until January 2027, when individuals submit tax returns for the 2025-26 year.
An analysis of company filings in June showed that more than 4,400 directors had left over the past year and numbers had jumped in the past few months, according to Companies House records.
• A ham-fisted inheritance tax grab on the middle class would end in tears
Departures in April were 75 per cent higher than the same month last year. The pace of exits was highest in finance, insurance and property.
Figures compiled by New World Wealth, the global analytics firm, and investment migration advisers Henley & Partners, suggested Britain lost a net 10,800 millionaires to migration last year, a 157 per cent increase on 2023.
The research said that high net-worth individuals with liquid assets of more than $1 million (£821,500) had left Britain every 45 minutes since the general election was called last year. Labour included the non-dom pledge in their manifesto, arguing that it would pay for 40,000 more NHS appointments each week.
The OBR had estimated that the abolition of the non-dom regime would raise £33 billion in extra tax over the next five years, although it admitted that this prediction was 'highly uncertain' because it depended on the decisions of a relatively small number of wealthy people.
A softer than expected wealth exodus, alongside higher than expected GDP growth, will ease pressure on the chancellor.
However, Reeves is still expected to face a hole of at least £20 billion in the autumn budget that must be filled by a combination of tax rises and spending cuts.
Officials are said to be considering changes to capital gains tax and adjusting how much can be given as a gift, and when, to avoid inheritance tax.
The Treasury said: 'The UK remains a highly attractive place to live and invest. Our main capital gains tax rate is lower than any other G7 European country and our new residence-based regime is simpler and more attractive than the previous one.'
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The Guardian
12 minutes ago
- The Guardian
How can England possibly be running out of water?
During the drought of 2022, London came perilously close to running out of water. Water companies and the government prayed desperately for rain as reservoirs ran low and the groundwater was slowly drained off. Contingency plans were drafted to ban businesses from using water; hotel swimming pools would have been drained, ponds allowed to dry up, offices to go uncleaned. If the lack of rainfall had continued for another year, it was possible that taps could have run dry. That, however, was just a taster of what could come down the line. On Tuesday, the government announced a 'nationally significant' water shortage in England, which means the whole country is at risk of running out if the dry weather continues. People across England are already banned from using hosepipes, with more restrictions probable over coming months. The UK Centre for Ecology and Hydrology (UKCEH), an independent research institute, has warned of exceptionally low river flows. Reservoirs are also at extremely low levels and groundwater is dwindling. Droughts are generally two-year events. A year of dry weather means water supplies are running out – that is what is happening now. Things really come to a head if the following year does not bring above average rainfall. That is when the shortages start to bite, with farmers unable to irrigate and households and businesses hit with sweeping restrictions. With reservoirs at record lows and stream flows exceptionally low, England is desperate for rain. Forecasts indicate that by 2055 England's public water supply could be short by 5bn litres a day without urgent action to future-proof resources, the equivalent to more than a third of the supplies available today. The effect on the economy will be profoundly negative. The thinktank Public First has estimated that the economic cost of water scarcity could be £8.5bn over this parliament. 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There are also the rivers that crisscross the country, which (when clean) include gin-clear chalk streams buzzing with mayflies and thronging with salmon and other fish. The UK is one of the rainier places in Europe. Some areas are wetter than others. In England, the Lake District generally receives an average of 2,000mm of rainfall a year, while in parts of the south-east it is as low as 700mm. Perhaps it is because the country has always had such rich resources, that they have been taken for granted. Running out of water has never really been in question. But with population growth and climate breakdown, this is starting to look like folly. It was in the 17th century that the New River Company began piping water into London's homes from the springs in nearby Hertfordshire for the very rich. Slowly the technology began to spread and grow in popularity. 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Telegraph
31 minutes ago
- Telegraph
Britain's chemical sector at ‘very high risk', claims credit insurer
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The Guardian
31 minutes ago
- The Guardian
A UK headline wealth tax? It may be simpler to put up existing taxes
Pressure to go further on wealth taxes – by creating new modes of clawing at hoards of hard-to-reach cash – is mounting. For starters, the fiscal picture is looking fairly bleak, with economists estimating that Rachel Reeves must raise £20bn – or even as much as £50bn – to meet her goal of balancing day-to-day spending against the revenue raised from taxation. On the government backbenches, meanwhile, MPs want the chancellor to squeeze the richest in society harder. They even put forward an early day motion last month calling for a 2% annual tax on individual assets over £10m. Yet introducing these kinds of taxes is often not straightforward, with the behaviour of the wealthy being hard to monitor and harder still to predict. The first significant problem is working out where the assets are and who holds them. That has always been difficult and has become even more challenging after one of the most important economic surveys, the household wealth data series, was suspended by the Office for National Statistics because of its low quality. The upshot is that HMRC simply does not know how many millionaires or billionaires there are in the UK. Without reliable figures, it is extremely hard to write policies, cost them and administer them. There is also a battle to be had with an 'old guard with set views' in Whitehall. Whitehall sources paint a picture of a Treasury led by figures influenced by economists whose thinking was prominent at Oxford University in the 1980s and 90s – such as James Mirrlees, Christophe Chamley and Tony Atkinson – leading to something of an orthodox view. In a nutshell, that position is that if you tax capital too much, it will stop investment and hamper growth. Or, in Chamley's words: 'Tax rate on capital income tends to zero in the long run.'. Since this era, the debate within economics has become more nuanced. A growing body of research suggests that some taxation on capital, even at relatively high rates, could lead to greater investment. As it becomes less attractive to hoard wealth because of taxation, risk appetites would then increase in pursuit of higher returns. You might be less tempted to keep your money in a vanilla savings account that can be taxed hard and easily if you can get a much better rate of return – even with a bit more risk – elsewhere. Treasury insiders argue that Reeves has followed the more modern logic, having already taken steps to widen the scope of inheritance and capital gains tax (IHT and CGT). They posit that her reluctance to pursue a headline wealth tax does not mean she has pulled her punches when it comes to taxing wealth. Hostile backbenchers, on the other hand, suggest she follows the old orthodoxy too closely. They often cite her decision to go for relatively small changes in the amounts of tax paid via CGT, rather than bring it more closely in line with income tax at the last budget, which also upset more senior political colleagues. What the debate about how to handle changes to IHT (which have been fiercely opposed by farmers) or CGT illustrates is that if the government really wants to tax wealth more effectively then it has all kinds of ways to do so before opting for a politically – and potentially economically – sensitive route with a headline wealth tax. Yet even changing existing mechanisms might not be easy, when the UK already has one of the highest rates of tax on property and wealth among developed economies, according to the Organisation for Economic Co-operation and Development. Sign up to Business Today Get set for the working day – we'll point you to all the business news and analysis you need every morning after newsletter promotion Political pressure may make it harder to maintain a more gradualist approach, however. Figures on the left of the Labour parliamentary party are attracted to totemic wealth taxes of the kind introduced in Spain – its so-called solidarity tax – and Switzerland. They see it as part of showing a commitment to rebalancing the economy. Reeves is critical of international examples, saying that Switzerland does not have IHT, and that Spain's wealth tax is so riddled with exemptions that it raises too little money. Some developed economies that had comparable wealth taxes have dropped them, too. 'We have inheritance tax. We have capital gains. We've just got rid of the non-dom tax status that doesn't exist anymore in our tax system. So we do have taxes that tax the wealthy,' Reeves said in a recent interview with LBC. Other measures that go further are not yet proven to work, she claims, saying that those who 'come up with simple solutions' must do more to 'explain exactly how it would work, whether it's an ongoing tax, what it would do to tax avoidance, what it would do about people moving or changing the way that their wealth is stored'. Economists argue that the government should focus its energies on raising existing taxes, such as equalising CGT with income tax, for example, or changing gifting rules around IHT first, rather than introduce a novel wealth tax. The Treasury is already examining gifting rules among other possible IHT changes. Yet while Reeves might agree with some of these arguments, it's less clear whether her cabinet colleagues will tolerate a slow and steady approach, particularly if the fiscal picture sours.
