(Nov 28): Tech billionaires, the owners of Premier League football teams and heirs to some of Europe’s oldest fortunes all recently left the UK because of higher taxes. Now, Britain’s finance minister is quietly trying to put a halt to the wealth and brain drain.
UK Chancellor of the Exchequer Rachel Reeves’ budget on Wednesday sought to curb the most controversial part of scrapping preferential tax treatment for wealthy residents hailing from overseas, known as non-domiciled individuals, who range from bankers to multi-billionaires.
The UK announced a limit on how much inheritance tax former non-doms could face locally on their global wealth. A £5 million (US$6.6 million or $8.58 million) limit per decade on certain trust structures applies retrospectively from the same month of the UK’s non-dom regime ending in April, making private wealth advisers see it as a way of curbing the changes’ most punitive effects.
In addition, budget documents also revealed plans to explore a “tax offer” to help attract high-talent individuals, in a pair of new policies that could help to restore Britain’s relationship with the global elite after Reeves’ first budget last year caused many to consider life outside the UK.
“These two measures appear to be an acknowledgement that the changes announced in last year’s budget to the non-dom regime went too far,” said Marc Acheson, a global wealth specialist at Utmost Wealth Solutions. But “question marks remain as to whether these measures will be effective.”
The changes may not be enough to tempt back many of those that have already left the country and offer a particularly pointed contrast with Labour’s messaging that those with the broadest shoulders will bear the brunt of changes, given the new tax break on trusts favours larger fortunes.
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“That horse has bolted,” Bobby Console-Verma, a former investment banker and founder of 1fs Wealth, a London-based financial technology firm that helps ultra-high-net worth individuals manage their assets, said on departed non-doms. “A lot of the wealthy have felt they’re not welcome” in the UK.
A UK Treasury spokesperson declined to comment.
The moves signal a climbdown in some ways from several soak-the-rich measures outlined at Labour’s first budget for more than a decade in October 2024, following Keir Starmer’s party sweeping to power with a manifesto targeting a crackdown on non-doms’ tax “loopholes” for their wealth.
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Business Secretary Peter Kyle signalled a growing recognition of the UK’s wealth turmoil earlier this week, acknowledging that tax hikes in last year’s budget had led some ultra-rich residents to leave. In Wednesday’s announcement, there are higher levies for well-heeled UK natives as well.
While Britain still remains a global wealth hub, the problem now facing Reeves is whether she’s already inflicted too much tax pain on a globally mobile group of deep-pocketed individuals, especially as rival nations offer their own tax incentives.
Billionaires such as Checkout.com founder Guillaume Pousaz, Revolut chief executive officer Nik Storonsky and Egypt’s second-richest man, Nassef Sawiris, have already exited the UK amid the scrapping of its non-dom system that allowed tax breaks on overseas wealth for as long as 15 years. Some wealthy individuals are coming to the UK amid immigration turmoil in other nations, such as the US under President Donald Trump, but they may not be enough to counter the outflow.
Overall, individuals who already left the UK control or share part of fortunes totalling at least US$120 billion, according to the Bloomberg Billionaires Index. Further departures emerged earlier this month amid reports of Reeves exploring a so-called exit tax on the assets of those moving overseas.
“They’ve continued to leave,” Mark Davies, founder of a tax advisory firm for ultra-wealthy individuals, said on the UK non-dom population. “Departures were accelerated by the fear of the leaked exit charge provisions, which were clearly a possibility but decided against.”
The UK Treasury also unveiled a consultation on Wednesday to support entrepreneurship, stoking hopes of Britain opening up more to the global elite even as it hikes taxes on using private jets.
Starmer’s administration has already started exploring a new investor visa for rich foreigners, Bloomberg News reported earlier this year, while the UK Treasury said this week it will seek views in “due course” to help attract globally mobile individuals to relocate to the UK.
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Unlike with other measures announced in October 2024, such as higher taxes for private equity professionals, Starmer’s administration didn’t formally consult on its changes for the UK’s non-dom regime. They marked the third major reform to the system within the past decade, helping erode Britain’s long-held reputation as a bastion of legal and political stability.
“Our global competitiveness is being tested,” said UK lawmaker Nosheena Mobarik, who wrote to Starmer, Reeves and Mahmood this month on stemming the nation’s wealth drain. “We must turn the tide.”
The non-dom tax status dated back to 1799, when it was introduced to protect colonial investments. Under the now-scrapped system, claimants could initially hold the status without any extra charges, but eventually faced annual costs of as much as £60,000 if they continued to reside in Britain.
The UK has now brought in a four-year system based on residency instead of the typically more complex concept of domicile, even as nearby nations such as Italy and Greece have brought in similar regimes within the past decade that offer longer timeframes, similar to Britain’s former non-dom regime.
Starmer’s administration is betting its non-dom reforms will bring in more than £30 billion in extra taxes over the coming years. A wave of UK think tanks are contesting those figures, however, warning of the threat to jobs and economic growth. The four-year timeframe for the replacement non-dom system is also often seen as making the UK a temporary destination for wealthy individuals.
Non-doms contributed about £120,000 each a year in employment, capital gains and income taxes on average, based on latest official data. That financial clout means even a small number of them leaving has the potential to upset the government’s revenue projections.
“They should have stayed at the 15 years,” UK billionaire John Caudwell said in an interview with Bloomberg. “One of the reasons you want to come is for your child’s education,” and, taking longer than four years, “you want them to continue right the way through the school system.”
Many who claimed UK non-dom status have relocated or have made plans to do so because of a single issue: Labour’s decision to remove inheritance tax breaks on assets held in overseas trusts at last year’s budget, going further than plans outlined in March 2024 by the then-ruling Conservative Party.
Labour’s measures included a 10-year residency timeframe before non-doms’ global assets entered the crosshairs of UK authorities for inheritance tax rates as high as 40%, one of the highest among developed nations. A September 2024 report commissioned by lobby group Foreign Investors for Britain then found that more than 80% of non-doms cited Labour’s inheritance tax changes as a major reason they’re likely to leave the country.
The UK Treasury expects the cap on inheritance tax charges for trust structures announced on Wednesday will help “retain” former non-doms as residents, according to a policy document.
One former non-dom, who spoke to Bloomberg News on condition of anonymity due to the privacy of their personal tax affairs, said the move was a step in the right direction but added they are still likely to depart the UK before they hit the 10-year residency limit under the new rules.
They pointed to a LinkedIn post from UK private client lawyer James Quarmby in response to Labour’s changes, with a headline that summed up the former non-dom’s thoughts: “Too little, too late.”
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