London is haemorrhaging the rich to such an extent that the UK’s capital has dropped out of the world’s five wealthiest cities.
Driven overseas by a combination of government tax hikes, failure to fully recover from the 2008 recession, continued fallout from Brexit and the sharp fall in the pound’s value, 18 centimillionaires (those with a net worth of $100 million or more) and two billionaires were among the estimated 25,000 wealthy that London last year, according to the Henley & Partners World’s Wealthiest Cities report from April.
The drivers may have been recent tax changes, but the problem, according to experts Spear’s spoke to, went deeper than that.
[See also: The real story behind private banking exodus and school VAT woes deepen]
Stuart Crippin, head of the private client team at Seddons GSC and Spear’s Top Recommended tax lawyer summarised the UK’s image problem: ‘One of the biggest challenges for the UK government is to change an international perception of the UK as being a country somewhat in decline.’
He added that concerns range from public safety to living standards, and that current tax reforms are at odds with any attempt to market Britain as ‘open for business’.
What’s needed now, experts told Spear’s, was a comprehensive strategy to reverse the brain and capital drain. That included policy clarity, global competitiveness and a strong narrative about the UK as a vibrant place to live, invest, and grow businesses.
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Why are the rich leaving?
London had the dubious honour of being the only city beside Moscow in the Top 50 to have recorded negative growth over the past decade, according Henley & Partner’s figures.
The abolition of the non-dom regime has become a lightning rod against a broader economic story. While the policy was finalised under Labour, it was first introduced by the Conservatives in March 2024.
This was a point emphasised by James Quarmby, partner and head of the private wealth team at Stephenson Harwood when he sat alongside shadow business secretary Andrew Griffith on a panel entitled ‘Life after non-doms: assessing the UK’s status as an international hub for private wealth’ at Spear’s 500 Live in May.
(Griffith, for his part, apologised on behalf of the previous government for its role in dismantling the non-dom regime).
The resulting changes have resulted in many wealthy individuals seeing the UK as an increasingly inhospitable place to preserve wealth.
Crippin said he had several clients, ‘who have actively taken steps to relocate from the UK, very much in response to the UK government reforms to the taxation of non-UK domiciled individuals’. Popular destinations include Portugal and South Africa, while others remain for now, influenced by personal ties or the appeal of temporary tax facilities.
The panellists at the Spear’s 500 Live, which also included Jurga McCluskey, a partner and head of the immigration practice at Deloitte, and Karen Perreira, managing partner at InterCaribbean Legal, were also in no doubt that the end of the non-dom regime and tax changes announced in the 2024 budget are to blame for the bleak outlook.
Spear’s Top Recommended Simon Allister, head of wealth planning at LGT Wealth Management, added that while the non-dom regime was undoubtedly significant in its own right, its impact went further. ‘The abolition of the non-dom regime has undoubtedly been a significant contributing factor, but it is by no means the only one… it has acted as the trigger for a wider reassessment – not just of tax, but of lifestyle, education, business conditions and long-term plans.’
The UK’s 40 per cent inheritance tax also weighs heavily. ‘At 40 per cent, the UK’s inheritance tax rate sits at the higher end of the global spectrum and is increasingly a focal point for affected individuals,’ Allister says.
Can the ride be reversed?
Despite the tightening of rules, there are still legitimate routes for tax planning. Crippin highlights the four-year rule, which means those arriving in the UK for the first time can still benefit from the four-year foreign income exemption. The new Temporary Repatriation Facility provides favourable tax treatment for foreign funds brought into the UK.
Allister said ‘early, strategic thinking… within the context of long-term estate and succession planning’ was key to effective and legitimate planning for individuals who continue to base themselves in the UK was
Trusts, often used to protect wealth across generations, come with inherent limitations. ‘Ownership and control over the assets transfers from the individual to the trustees,’ Crippin explained. This can slow down decision-making, particularly when formalities such as trustee resolutions or involvement of a protector are required. Alternatives like family investment companies and foundations are increasingly favoured for their agility.
In contrast to punitive tax moves, the UK’s system of philanthropic reliefs remains competitive. ‘The UK’s tax reliefs for charitable giving are attractive and continue to resonate with clients who want to make a meaningful impact,’ says Allister. UK-based charitable foundations continue to serve as powerful vehicles for legacy giving and public-good investment.
[See also: How the next generation of donors – and advisers – can shape the future of philanthropy]
Business Investment Relief remains in place (albeit until 2028 and in a curtailed form), and offshore asset rebasing for capital gains purposes offers strategic value.
‘Furthermore, there are opportunities for individuals to take steps to rebase their offshore assets for Capital Gains Tax purposes, which will result in preferential treatment when such assets are sold/disposed of,’ Crippin told Spear’s.
Crippin sounded a warning for people seeking tax refuge in other countries. ‘It is always worth remembering that, whilst the UK tax burden for non-UK domiciled individuals may have increased, this is a trend which is being seen in a number of other jurisdictions too.
‘Consequently, it is important for such individuals to consider carefully the other jurisdictions with which they are closely connected to ensure that there is no risk of a double tax burden or exposure to a greater tax burden than would be the case under the new UK regime. Again, the need to take professional advice is clear.’
