The wealthy are easy targets for simple minds. The mantra of “paying their fair share” plays to the masses who want someone else to foot the bill for government services. The same wealthy tend to invest and spend, supporting businesses both old and new. Yet, raising taxes does not necessarily lead to more revenue for the government as nothing is static, and people tend to act rationally when they are under attack. Decades ago, the Laffer Curve was the theory created to explain this phenomenon, yet too many unsophisticated policymakers ignore it to their detriment.
When the Labour Party took over the UK government, they sought to fill a “black hole” in the budget. One of the methods pursued was to punish the wealthy by removing the Non-Dom status, where non-UK residents do not pay taxes on earnings outside the UK. This policy meant that global money moved to the UK, mainly London. The wealthy purchased houses and spent money that supported the British economy. Now, these same wealthy individuals have fled the UK, removing coveted revenue from the country – something Labour somehow did not anticipate.
The Sunday Times notes that as Labour took over, the wealthy left the UK. Over 10,000 millionaires left Britain in 2024, an increase of 157% over the prior year.
This mass exodus benefited other countries, including Switzerland, Italy, and the UAE. The report adds that the UK lost 12 billionaires and approximately 78 individuals worth over $100 million. Higher taxes also discourage risk-taking entrepreneurs who are dearly needed to generate jobs and economic growth.
Henley & Partners, a residence and citizenship consultancy, reported in October that “Wexit,” concerns regarding increased taxes was the top reason for leaving Britain.
Stuart Wakeling, the head of the UK office of Henley, explained.
“What many politicians and academics in the UK fail to understand is that there are several high-income countries globally that don’t levy capital gains tax, including the likes of Singapore, the UAE, and even New Zealand. There is also a much longer list of countries that don’t charge estate duty, including high-growth markets such as Canada, Australia, and Malta. In the new global world, these countries are all attractive migration options for English-speaking entrepreneurs. It is also worth noting that although the US charges a similar estate duty rate (40%) to the UK, the threshold there is much higher, which means only the super-rich need to pay it, whereas in the UK even upper-middle class individuals are pulled into it.”
Yesterday, it was apparent that reality had hit the Labour government as Chancellor Rachel Reeves acknowledged they would probably need to hit reverse on their policy.
An estimated two-thirds of the 74,000 Non-Doms are planning to exit the UK. Labour now plans to “relax” their planned tax rule.
Charlie Sosna, Head of Private Wealth and Tax at Mishcon de Reya, said their clients would appreciate the comments by the Chancellor. Sosna noted that many of their clients had sought to relocate their home countries, which were more interested in welcoming their “talent and wealth.”
“We certainly have many client families and their family offices who wish to review their position in the UK and are seeking assistance in relocating to other jurisdictions as a response to the abolition of the ‘non-dom’ regime.’ It is important to remember that these clients do, and are very happy to, contribute and pay their way in society. However, the Government must balance that against offering a regime that entices them to relocate to or stay in the UK rather than simply remain in their home countries,” said Sosna.
He added that proposed new rules may not go far enough to entice entrepreneurs and the wealthy to relocate to the UK. His firm has seen slowing interest in moving to the UK as many do not see the country as welcoming them and their businesses.
“Given the Government’s desire to attract these people, it is understandable that they have taken stock of the reaction and decided to act to minimise the loss of these individuals and seek to convince those abroad that the UK is where they want to live and invest,” Sosna stated. “We welcome any changes the Government may introduce to address these issues and ensure there is a regime where all contribute to society and ‘pay their way’, but in a way that incentivises them, their families and their businesses and investment to pick up sticks and come to, and remain in, the UK.”
Carol Katz, Partner at Mishcon de Reya, said the departure lounge is fuller than the arrivals in Britain. Globally mobile people are looking for a way out.
“Expanding the temporary repatriation facility could encourage more people to stay in the UK as the reduced tax rate (either 12% or 15%, depending on the year in which it is designated) is a significant carrot with which to encourage people to bring funds here to settle for the long term. Our clients would want to see the details before changing their plans, and time is running out.”
The anticipated new regime may only appeal to people looking for a brief stay in the UK as four years is not a sufficient amount of time if you want to relocate an entire family. The wealthy have better options.