09-04-2025
A UK tax rate of 67% makes Dubai move the obvious choice for the non-domiciled
Over the next five years, Britain will lose more millionaires per capita than any other country in the world. That's on top of the 10,000 millionaires who left the UK last year, taking their tax contributions, investments and business activity with them. The UAE was a favoured destination. In light of a struggling economy and growing fiscal obligations, Britain's wealth departure presents serious challenges. At a time when the government has pledged more money to fund public services, the loss of so many high-net-worth individuals (HNWIs) will force Chancellor Rachel Reeves to make difficult decisions about whether to scale back her spending pledges, or raise money by raising taxes elsewhere. So, what's driving them away? The answer, of course, depends heavily on individual circumstances – but high tax rates, a challenging business environment and declining public safety are all contributing factors. For many millionaires, the dovernment's decision to abolish the non-domiciled tax regime last year will have been the straw that broke the camel's back, pushing them to finally relocate. For those unaware, the UK's non-dom tax regime allowed foreign citizens to exempt their overseas earnings from UK tax, for a fixed fee. At its face, this system is an intuitive one: non-doms were still liable to pay tax on the money that they made in the UK, but could live here without subjecting their overseas income to sky-high British tax rates. The benefits for non-doms are obvious, but the scheme also provided significant benefits for the British public. As of 2024, non-doms were estimated to pay, on average, £120,000 a year in British taxes. Some are likely to have paid millions, tens of millions, or even hundreds of millions in tax on their domestic income. That's to say nothing of the broader benefits, including investment in British businesses, and consumer spending on goods and services in the UK. When the government announced its intention to scrap the scheme, the Adam Smith Institute was clear: abolishing the non-dom tax treatment, without introducing an alternative system for attracting HNWIs, will be a disaster for the UK's finances. Incredibly though, in implementation this bad idea is even worse than anticipated. The government's 2024 Finance Act contains two particular provisions that will effectively make it impossible for many non-doms to remain in the UK. First, the new rules governing the transfer of assets abroad are excessively wide-ranging. If a UK resident owns a foreign company, its profits can be treated as personal income – resulting, in effect, in a tax rate on overseas business income of 67 per cent. Second, HMRC, the UK's revenue collection agency, has refused to say whether income repatriated to the UK under the "Temporary Repatriation Facility" will be treated as tax avoidance. This uncertainty will make it impossible for many non-doms to remain in the UK. For many, it simply makes more sense to up sticks and relocate to wealth-friendly jurisdictions, such as Dubai. With its low taxes, straightforward regulatory environment and safe streets, Dubai has become the premier destination for non-doms fleeing the UK. Combine these factors with a world-class airport and warm weather all year round, and the UK-to-Dubai pipeline should come as no surprise. Since the 1970s, Dubai has understood the value of human capital, and has sought to attract wealthy individuals from around the world. The city is now reaping the rewards. It punches above its weight in the world of international commerce, and is a world-renowned destination for conferences, summits and meetings. In an increasingly competitive world, the success or failure of international cities will largely depend on their ability to attract high-quality people. While London and the UK are driving away wealth through excessive taxation, Dubai is taking the opposite path. Don't be surprised to see more British expats – and more British businesses – setting up shop on the shores of the Creek in the years to come.
