The UK is poised to lose the greatest proportion of millionaires globally over the current parliamentary term, with the share of millionaires projected to plummet by 20% by 2028, analysis from a leading economics think tank has said.
Forecasts from the Adam Smith Institute (ASI) show the number of HNWs, defined as possessing at least one million US dollars across various asset classes, including shares, property, pension funds, and cash, will dwindle to just 3.62% from 4.55% in five years.
The HNW hit to the UK economy
This mass exodus, driven by high taxation levels, the threat of further increases, the impending abolition of the non-domicile tax status, and a cultural climate perceived as hostile towards HNWs, outpaces those seen in countries such as China and Russia.
The ASI and tax experts have warned the ongoing decline could have serious repercussions for the UK’s economy.
Millionaires are significant wealth creators and contribute substantially to the public purse, paying a significant share of taxes that fund essential services. The top 1% of earners, for instance, contribute 29.1% of income tax revenue.
'Maybe it's not too late'
Spear's Top Flight tax lawyer, and Payne Hicks Beach chairman, Robert Brodrick, said the analysis 'reflects what we are seeing on the ground', adding there was still time to introduce a more welcoming tax environment.
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[See also: Flight risk: Britain’s super-rich are on the run]
'Once they have left they are unlikely to come back. Maybe it’s not too late? We have a golden opportunity to replace the non-dom regime with a system like the one in Italy that charges an annual fixed amount to satisfy a person’s worldwide tax liabilities, which encourages UHNWIs to base themselves and their businesses here. Instead, we are driving them all away which is seriously damaging to the UK economy.'
Dhana Sabanathan, partner in the private wealth team at national law firm Michelmores LLP said she was 'not surprised' by research and called for a policy rethink.
'The Adam Smith Institute research should be a warning to policy makers to pause and reflect before any new legislation comes in.' she said.
[See also: Where have all the UK billionaires gone?]
'Encouraging ultra-wealthy people to leave the UK is not in the country’s best interests. We will lose out on the jobs they create, the companies they listed here, the money they would have spent, and the tax that they would have paid.
'We desperately need more consultation and a period of certainty and stability. That is what the UK has historically been known for, and we need to uphold that reputation'.
'Wake up call'
Maxwell Marlow, Director of Research at the ASI, said the institute's findings 'should be a wake-up call to the Government'.
The ASI recommendations include the abolition of inheritance tax, cuts to capital gains tax, and a thorough assessment of the UK’s tax and regulatory treatment of high-net-worth individuals and non-doms.
'The more millionaires who leave the UK, the worse the impact on the economy will be,' Marlow said.
[See also: New Labour government unveil crackdown of non-dom regime — as it happened]
Marlow noted that the exodus is not solely a reaction to tax policies but also a response to a culture increasingly viewed as antagonistic toward wealth creation. 'We can hardly be surprised that so many millionaires want to leave as long as we continue down this path,” he adds. 'This trend is not set in stone. We need to reconfigure our approach to attract more millionaires to our shores and foster an environment that encourages the growth of new wealth at home.'
