Why the super-rich are leaving Britain

Times

a day ago

Some of Britain's wealthiest are taking their money overseas, leaving ordinary taxpayers facing bigger bills, analysts have warned.
An estimated 16,500 dollar millionaires are expected to leave the country this year — more than double China's projected exodus of 7,800. This would put the UK on top of the global rankings for millionaire departures for the first time in a decade, according to the wealth migration advice firm Henley & Partners.
It says that a key catalyst has been the April overhaul of the centuries-old non-domicile tax regime.
The previous system allowed an estimated 74,000 wealthy foreigners who live here (but are officially domiciled overseas) to shield their worldwide assets from British taxes for annual fees of £30,000 or £60,000. The new system requires non-doms living in Britain for more than four years to pay UK income and capital gains taxes on all their global earnings. Those here for a consecutive ten years before their death could find their worldwide assets subjected to the UK's 40 per cent rate of inheritance tax (IHT), one of the highest in the world.
The government estimated that its non-dom rule changes would raise £12.7 billion for the Treasury over the next five years. However, the Centre for Economics and Business Research think tank said that if 25 per cent of non-dom taxpayers left the UK, the net gain to the Treasury would be zero.
If half of them leave, revenues would drop an estimated £12.2 billion by 2030 — about £174 less to spend per person in the UK.
Experts now fear that the chancellor, Rachel Reeves, will have no choice but to raise taxes in the autumn budget. This problem is illustrated by the so-called Laffer curve principle, which suggests that if taxes are too low the government misses out on revenue, but if they're too high people stop working or investing, ultimately causing tax income to fall. The theory is that there's a sweet spot where tax rates generate the most money for public services.
Jason Hollands from the wealth manager Evelyn Partners said: 'While some will not shed a tear for wealthier people relocating overseas, I fear this is going to backfire for the Treasury and the jobs market.'
Hollands points out that the Treasury is increasingly reliant on the wealthiest for tax revenue. In 1978-79, the top 1 per cent of earners paid 11 per cent of all income tax, according to the Institute for Fiscal Studies. This year, the top 1 per cent will pay about 29 per cent of all income tax.
'As high earners and asset owners up sticks, this will weigh heavily on tax receipts and inevitably the government will either have to confront the difficult choice of austerity or, more likely, an increase in taxes more broadly on the remaining population,' Hollands said.
'It is not just the tax receipts of wealthy people leaving the UK that will be missed — businesses and charities that benefit from their spending will be affected too. Gardeners, cooks, cleaners, restaurants, theatres, car showrooms, hotels and the property market will all suffer, undermining the jobs market.'
This analysis comes after Reform UK this week proposed a Britannia Card scheme for non-doms. Wealthy foreigners would pay a one-off fee of £250,000 for a decade of tax-free foreign income and gains in the UK, plus exemption from IHT. The party leader, Nigel Farage, said fees would be earmarked for the lowest-earning 10 per cent of full-time workers, each estimated to get £600.
'The main reason I left was the tax '
Alexander Amosu, who grew up in Kilburn, northwest London, left the UK last year. The entrepreneur, who made about £9 million in the early Noughties from a mobile ringtone company, now lives in Dubai in the United Arab Emirates.
Amosu, 50, owns and runs Lux Afrique, a concierge company, and Lux Afrique Boutique, an online platform that sells and delivers luxury goods to Africa.
'I'm very entrepreneurial and when you're in a market you want it to be supportive of you as a business person. Taxes were the main thing,' Amosu said.
'I'm thinking about selling my business in the next few years and I knew the tax liability I would face when I sold. I wanted to find somewhere that would be more complimentary to me as an entrepreneur.'
Amosu pays himself an undisclosed salary from his company. In the UK he was in the additional rate tax bracket, paying 45 per cent income tax on anything he earned over £125,140.
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In Dubai, he pays no income tax at all and there is also no corporation tax to pay. Local businesses pay 9 per cent in Dubai, but because Amosu runs an international company, the pays nothing.
He knows he is not alone in making the move. 'Since I've been here, every week I'm meeting someone I know in Dubai. There's a massive exodus,' he said.
'The UK is losing talent. It is all people like me, who love the UK and want to stay — but it feels like the choice they are giving you means it is too hard to stay. Ultimately, it feels like we don't have a choice any more.'
Why are they leaving?
The escalating trend is stark: 9,500 dollar millionaires left the UK last year; 200 in 2023 and 1,600 in 2022, according to Henley & Partners. Critics point out, however, that the number leaving still represents a tiny proportion of the UK's estimated 3 million dollar millionaires.
Marc Acheson from the wealth manager Utmost Wealth Solutions said: 'Unfortunately these numbers aren't surprising. Ever since the budget and the removal of the IHT protections on foreign assets, we have witnessed a significant flight of wealth, and we are still seeing many consider international options with increasing regularity.'
The scale of departures is said to have prompted Reeves to consider reversing her policy, introduced in April, of subjecting non-doms to IHT.
Other tax changes that have affected the wealthy include the freeze on income-tax thresholds which began in 2022 and will last until at least 2028. This means earners are paying more tax as their income increases and pulls them into higher tax bands.
During the freeze, about two million people will move into the 45 per cent income tax band that applies on earnings above £125,141, according to HM Revenue & Customs estimates obtained by the wealth manager Quilter.
Capital gains tax (CGT) and dividend tax allowances have also become far less generous. CGT is paid on gains made from shares and property and you used to get a tax-free annual allowance of £12,300. This dropped to £6,000 in 2023 then halved again to £3,000 last year. The dividend tax allowance for investors has shrunk from £5,000 in 2017 to £500 today.
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The application of VAT to private school fees for the first time this year has also diminished the UK's appeal to the very rich.
Juerg Steffen, the chief executive of Henley & Partners, describes Britain as 'a cautionary tale in this new era of wealth migration', noting that the UK's wealth outflow had been years in the making but accelerated by pivotal policy shifts. 'Before 2016 the UK had always attracted more millionaires than it lost to migration.'
Where are the wealthy moving?
The primary destination is the United Arab Emirates (UAE), with Dubai and Abu Dhabi expected to gain a net 9,800 high-net-worth individuals from around the world this year.
Steffen attributes the UAE's appeal to 'zero income tax, world-class infrastructure, political stability and a regulatory framework that treats capital as partner rather than prey'.
The United States also remains a top magnet, projected to see a net inflow of 7,500 dollar millionaires.
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Switzerland is set to attract a net gain of 3,000 migrating dollar millionaires this year; Italy 3,600; Portugal 1,400; and Greece 1,200, Henley & Partners said. Monaco, estimated to gain about 200 millionaires, remains particularly popular among those from the UK, Africa and the Middle East.
These countries have favourable tax regimes and lifestyle appeal and some have 'investment migration programmes', which can grant citizenship in exchange for financial contributions.
Where are the lowest taxes?
Many countries have no personal income tax, CGT or IHT. These are often small nations or city-states with robust economies driven by sectors such as tourism, finance or natural resources.
Monaco and the UAE have no income tax or CGT and Monaco has no property tax.
Other countries with standard tax systems offer attractive incentives for the wealthy. These often involve flat taxes on foreign income or specific exemptions. For example, Switzerland offers 'lump-sum taxation' where qualifying foreign residents who are not employed in the country pay a tax based on living expenses rather than actual income and wealth.