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Telegraph
13 hours ago
- Business
- Telegraph
Labour's next reversal must be on non-doms before it's too late
The abolition of the non-dom tax regime could turn out to be the worst decision taken in Rachel Reeves's first Budget. The Chancellor was convinced that few of the 83,000 foreign entrepreneurs and investors would leave the UK after its abolition and that they would still contribute £12bn in taxes over the course of the parliament. The reality is turning out to be starkly different. Non-doms are leaving in their thousands, and taking their tax contributions, investments and potential to create jobs with them. The latest report into the abolition of non-dom status by a former Treasury economist found that more than 10pc of non-doms have already left the UK. This follows analysis from the Centre for Economics and Business Research (CEBR) that found that once 25pc of non-doms have departed, the policy will end up actually costing the Treasury money. Tax advisers are predicting that 40pc, possibly more, of non-doms will leave the country. This will have a huge impact on our public finances, leaving the Chancellor with a multibillion-pound shortfall in tax receipts, which every other taxpayer will have to pick up. While Britain is showing these highly productive people the door, other countries are rolling out the tax red carpet. Italy recently introduced a flat tax regime for foreign investors, allowing them to pay a fixed annual payment of €200,000 (£170,000). In Greece, they are charged a flat annual tax of €100,000 if they invest in the country. America is planning to expand its golden visa programme and the UAE has built one of the world's fastest growing and dynamic economies by fostering an exceptionally welcoming environment for international entrepreneurs. As an entrepreneur with investors and clients based internationally, I am acutely aware of how this policy is damaging the UK's standing. Britain has huge advantages that can attract the world's best entrepreneurs to come here, especially our outstanding schools and universities. But the message I hear constantly from those affected by this tax change is that the UK is not somewhere that welcomes them. That perception urgently needs to be addressed. Despite the prevailing narrative that they are not paying their fair share, the somewhat inconvenient facts are very different. Non-doms currently contribute disproportionately to public finances. In 2022-23, the average non-dom paid 21 times more income tax than the median UK worker. They are not just taxpayers, they are economic catalysts. They build businesses, invest in start-ups, create jobs and contribute to philanthropic causes – hospitals, the arts, charities and even football clubs. Their financial footprint extends beyond income tax to VAT, capital gains tax and National Insurance. The CEBR estimates that in 2023 alone, this group generated £7.7bn in total revenue across all tax types and consumer activity. It is unrealistic to expect the Chancellor to backtrack completely on what was a flagship policy, even considering the enormous economic harm it is causing. Another reversal would likely be too embarrassing after the welfare debacle this week. But there are practical steps she can take to ensure Britain has a competitive offer in comparison to other countries, while ensuring these individuals pay their fair share of tax. Two changes would send an important message that Britain wants entrepreneurs and investors here. First, altering the rules so non-doms do not have to pay inheritance tax (IHT) on all their worldwide assets. These are businesses or assets they built away from Britain and before they came here – not only is it excessive overreach, but it is the single most uncompetitive policy a government could implement in a modern highly fluid and global world. The Government should ensure that the value of non-UK assets accrued by non-doms before 2025 will not be included in future IHT assessments. Returning to the rules before this year that ensured these assets were not subject to tax is the crucial first step in winning back confidence in Britain. Second, the Government bodged a Budget measure it thought would attract non-domiciled people to stay - the temporary repatriation facility. This was supposed to enable them to bring all their worldwide capital into the UK at a preferential 12pc rate. The problem is that tax advisers are warning, understandably, that they fear the government will find a way to tax this capital at higher rates in the future – retrospectively. A simple amendment to the next Finance Bill could offer greater certainty and security, but without it, few foreign entrepreneurs will want to risk bringing their global assets into the UK. The real question is whether the UK wants to remain a hub for global capital and entrepreneurship, or whether it's prepared to watch that capital and the entire ecosystem that depends on it move elsewhere. If the Chancellor doesn't fix this issue fast, the question will not be 'how many are leaving?' but 'why would they ever return?'.
The Independent
18-06-2025
- Business
- The Independent
Rachel Reeves cannot afford to lose any more non-doms
Rachel Reeves is to water down plans scrapping her non-dom tax rules amid concerns about the number of wealthy individuals deserting the UK. It must be true, because it's being repeated everywhere – complete with a bland, non-denial from the Treasury: 'The government will continue to work with stakeholders to ensure the new regime is internationally competitive and continues to focus on attracting the best talent and investment in the UK.' A key item under discussion is said to be the proposal to make non-doms' worldwide assets liable to inheritance tax, or IHT, including those held in foreign trusts. There is no doubt many rich people have gone. One analysis by Bloomberg puts the number of company directors who have left at 4,400 in the past year. Examination of Companies House filings shows departures were 75 per cent higher in April than in the same month last year. The worst affected sectors were finance, insurance and property, all of them popular with non-doms. In the most expensive areas of London, stories abound of shuttered mansions, and a knock-on effect across restaurants, hair and beauty salons, car firms and all the other ancillary services. The UK, once a favoured magnet for the world's billionaires and multi-millionaires, has fallen off its perch. A recent Oxford Economics survey found that 60 per cent of tax advisers expect more than 40 per cent of their non-dom clients to leave within two years of Reeves ending their beneficial status. With them will go their families, close staff – and their money. It was the latter that made previous governments, including Labour, seek to attract them in the first place. If they base themselves in Britain, they are more likely to spend and to invest here. That is why other nations are doing their level best to woo them. It's what the Treasury means when it refers to the new regime being 'internationally competitive'. What is bizarre and shaming is that this administration did not see it coming. Seemingly, ministers did not realise that non-doms would quit. They did not appreciate that, in today's world, rich people can move freely and easily and work from anywhere. Either they are guilty of extraordinary unworldliness, deluding themselves that wealthy foreigners would carry on living in the UK merely because they like it here – ignoring the effect on their finances; or they simply did not care, and allowed political ideology to prevail. Whatever the answer, they are now engaged in the sort of reversal and damage limitation exercise which is becoming all too familiar where this government is concerned. The question now is: will it be enough? Already, South Africa's richest self-made woman Magda Wierzycka, the billionaire behind UK venture capital fund Braavos, has stated she will shelve plans to leave should the chancellor U-turn on IHT: 'I would absolutely stay and it's not about protecting my money from the tax man. I pay all my taxes, but South Africa has foreign exchange controls and I don't know whether [my estate] would be able to pay the IHT bill under the current rules.' Whether others are so persuaded, and if Reeves does pull back entirely on IHT, remains to be seen. The problem for her and for Keir Starmer is that the tone has been set. Even if they do climb down, the feeling persists that this iteration of Labour (as opposed to that of Tony Blair, which famously declared it was 'intensely relaxed about people getting filthy rich') cannot abide well-off people. The purging of the non-doms followed a pattern. It joined VAT on private schools, the removal of the winter fuel allowance, hitting farmers with their own new IHT bills, and other measures, aimed at the more advantaged end of society. They can afford it, appeared to be Downing Street 's view. That will be hard to shake-off. The hope must be that the attractions of the UK will weigh heavily and the non-doms will not exit and some, many even, will return. Starmer and Reeves, having set their calamitous course, have much work still to do.
