Belatedly – almost a full year after Labour came to power, in fact – the government has finally realised the damage it is doing.
In her first Budget as chancellor, Rachel Reeves scrapped the non-dom tax status, which for centuries has allowed some of the UK’s biggest wealth-creating residents to limit the amount of tax they paid on their overseas earnings. Days before this beleaguered administration’s first anniversary in power, Reeves is said to be considering one of those U-turns that have become fashionable in Labour circles.
Should it happen – and, as a non-domiciled resident myself, I really think it should – the chancellor’s change of heart will come after a spate of high-profile (and very high-value) people have left the UK for more favourable tax jurisdictions. Following the abolition of the non-dom tax status in April, one of Britain’s richest men, Lakshmi Mittal, the billionaire steel magnate behind the world’s largest steel company, announced his intention to leave for tax-friendlier shores.
He wasn’t alone. Whatever Reeves comes up with to stem the non-dom exodus – and she’s rumoured to be reviewing changes that made the worldwide assets of all UK residents subject to inheritance tax at 40 per cent – there’s a feeling among the one-percenters that it will be too little, too late.
More than 10,000 millionaires are reported to have left the UK in the past year, with one in 10 non-doms relocating since Labour came to power. According to the latest Henley Private Wealth Migration Report, published this week, Britain is set to haemorrhage 16,500 millionaires this year – a new record, Government changes to the non-dom regime could end up costing the Treasury more than £12 billion in its first year alone.
Having made my millions by launching a fintech firm in north America, I myself am off to start afresh – in Italy, which has a lump-sum tax regime of €200,000, designed to attract investment from foreign high net-worth individuals.
Just as Reeves was wondering how Britain might compete, Nigel Farage announces how a Reform government would woo back billionaire investors and entrepreneurs: by charging wealthy non-doms a £250,000 fee for access to a bespoke tax system that grants them the tax exemptions they once enjoyed for free.
Would Farage’s “Britannia Card” idea – which would allow high-net worth individuals like me to to avoid inheritance tax – be enough to stop me from moving my business to Italy? Probably not, actually.
I’m Canadian by birth and a mum of six, and have lived in the UK since 2022. With a doctorate from Henley Business School, an MSc and an MBA in finance focused on consumer credit, I launched my fintech business in 1995 that turned over more than $2 billion.
I have also spent millions restoring Lympne Castle, a fortified Grade I-listed manor house in Kent used by successive Archbishops of Canterbury in the middle ages, to its former glory. And, thanks to Rachel Reeves, I am ready to walk away from it all.
Britain’s non-domicile tax status was established in 1799, when George III was on the throne, and successfully transformed the UK into a financial powerhouse. It meant that a non-domiciled individuals – some of the country’s biggest wealth creators, but whose permanent residences are outside the UK – paid tax only on the money they earned in the UK.
It was a beautiful symbiotic relationship, like a well-manicured garden and the bees that pollinate it. For centuries, non-doms have poured their hard-earned cash into the economy, set up businesses and created employment opportunities. Until this April, when Labour abolished the non-dom status, funnelling our richest investors and entrepreneurs towards the departure lounge.
In her quest to better tax the wealthy, Reeves effectively handed a red card to 74,000 affluent individuals and families, many of whom are in the top 3 per cent of taxpayers. This is not just a blunder; it’s akin to setting fire to a cash register and wondering why the store is suddenly empty. Those non-doms collectively contribute about £8.9 billion in income tax, capital gains tax and national insurance. By pushing them out of the UK, Reeves has not only hurt the economy but has also exacerbated poverty for the one in five people living in the UK who are already struggling to make ends meet.
Countries like Dubai, Monaco and Switzerland are already rolling out the red carpet, saying: “Come invest your billions here – we’ll even throw in a free latte!” Meanwhile, in the UK, the government is shouting: “Stay! But also pay taxes on your foreign assets, your inheritance, and maybe even your pet goldfish and, oh, you can only stay four years…”
It’s no wonder the non-doms are choosing to leave. They’re not just leaving their homes; they’re taking their investments and future revenue with them, and the UK economy is left standing there like a forlorn child in the playground.
Now, let’s consider a different approach. Instead of dismantling a system that has historically been beneficial, why not implement a fee for non-doms to remain in the UK?
Imagine charging £250,000 a year, as Farage has suggested, which could help fill the financial black hole created by the government’s ill-fated fiscal decisions. This would not only maintain the £8.9 billion in tax revenue, but could also provide an additional £13 billion from fees.
While the idea of exempting non-doms from inheritance tax might seem appealing, it doesn’t address the broader issues of worldwide asset taxation. That said, given Farage did not address the four-year cap or the taxation on foreign assets (does he assume everyone wants to be double taxed?). The proposal feels to me like a half-hearted attempt to appease the masses while ignoring the real problem. If we want to make a meaningful change, we need to rethink our approach entirely.
The non-dom exodus serves as a cautionary tale about the consequences of political decisions that ignore economic realities. Rather than offering a Britannia Card, how about simply taxing the wealthy – and not at the expense of the very system that has historically benefited the UK economy?
Dr Ann Kaplan Mulholland is CEO of iFinance Canada. The writer’s fee for this article has been donated to Z2K, a charity working to end poverty in the UK
