This time last year, tax advisers to the UK’s HNWs were grappling with the fallout of the Labour government’s changes to the non-dom regime. Twelve months on, with a new prime minister and chancellor in Downing Street, this remains a key issue.
Whether the much-discussed tax changes will raise revenues overall rests on how many wealthy individuals who previously held non-dom status stay and become full UK tax residents, and how many will choose to leave the country – or simply avoid becoming a UK tax resident.
The Centre for Economics and Business Research (CEBR) put the break-even point at 25 per cent of former remittance basis users in the first full year of the new regime. If any more departed the UK, the tax changes would have had a deleterious effect on the country’s finances, according to CEBR’s analysis.
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Some 30 per cent of the expert tax advisers to HNWs surveyed by Spear’s believe more than 25 per cent of former non-doms left the UK in the 2025-26 tax year alone. But we won’t know whether they’re right until the figures for that tax year are made available by the government in 2027.
And the lasting consequences for the public finances and wider UK economy are unlikely to become clear until several years after that. ‘Many simply couldn’t move or relocate immediately following the non-dom changes,’ says Daniel Channing, group head of private client services at trust and fiduciary services firm Whitmill. ‘Businesses had to be restructured, children had to finish key schooling years and personal affairs had to be sorted.’
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In July, the Financial Times published a story that described a 0.5 per cent fall in the number of non-doms for the 2024-25 tax year as ‘casting doubt on claims tougher rules would lead to wealthy people leaving’.
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However, some of the advisers who spoke to Spear’s for this article – more than 40 per cent of whom describe their typical client as having a net worth of £100 million or more – question whether this kind of analysis would prove to be accurate in the long run. Channing describes wealthy individuals as forming a ‘queue’ to leave the country, but first going through the rigmarole of unravelling their UK ties at varying speeds as they plan to relocate.
Despite instability across the Middle East, this year’s Spear’s Tax Survey reveals that the UAE remains the primary beneficiary of HNWs’ global moves. The Gulf state is cited by 36 per cent of respondents as the preferred jurisdiction for relocating clients. Italy ranks second at 21 per cent, followed by Portugal at 15 per cent. The choice between these destinations highlights a clear split in clients’ profiles and priorities.
‘Italy and the UAE have favourable tax regimes, but the decision between the two tends to come down to whether clients are still actively running businesses,’ explains Andrew Sams of multifamily office Hundle. ‘Where clients are operating businesses, there is a strong preference for the UAE, whereas Italy prevails for those with family still in the UK.’
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The appeal of emirates such as Dubai and Abu Dhabi also rests on their infrastructure. As Kingsley Napley partner James Ward points out, the UAE offers a ‘simple tax solution, easier visa entry than most countries, warm weather, business opportunities, and closer access to Asian and Indian markets’.
So far as the domestic tax regime is concerned, UK advisers mainly favour structural modernisation of existing policies over aggressive new levies. Reform of council tax – or its replacement with a property or land value tax – emerges as the most supported policy proposal, with 51 per cent of respondents very or somewhat in favour.
Conversely, appetite for an increased inheritance tax levy or a dedicated wealth tax on assets exceeding £10 million was minimal, garnering opposition almost across the board.
[See also: Is the UK about to tax bankers more?]
Indeed, introducing a wealth tax could exacerbate existing risks, notes Matthew Gamman of Cone Marshall. ‘Once individuals begin to fear that the window for an orderly departure may close, the rational response is to leave sooner and preserve as much capital and flexibility as possible,’ he explains. ‘The threat of closing the door does not necessarily keep people in the room, it may simply persuade them to leave before it shuts.’
Measures that broaden the tax base and simplify the system are far preferable to ‘headline-grabbing taxes that risk driving investment or talent elsewhere’, says Matthew Radcliffe of Russell-Cooke. ‘Policymakers should remain mindful of this country’s international competitiveness, particularly in relation to attracting entrepreneurs, investors and internationally mobile families.’
For many tax experts, the principal threat is the compounding strain of constant reform. ‘The concern is the cumulative effect of successive changes on business ownership, succession planning, family wealth and long-term certainty,’ says Catrin Wigley of Hugh James.
[See also: Do HMRC’s letters to billionaires spell the end of ‘complete privacy’?]
This regulatory fatigue is reflected in a widespread lack of confidence regarding the UK’s economic trajectory. Nearly half of respondents (45.5 per cent) express a lack of confidence that Prime Minister Andy Burnham and Chancellor John Healey will be able to improve the UK economy overall during the remainder of the current Parliament.
Much of that scepticism stems from a belief that the Treasury is relying on an artificial short-term revenue spike.
‘When the CGT and IHT boon ends from those divesting their wealth, the numbers from 2027 onwards will start to look increasingly disappointing,’ warns Trowers & Hamlins’ Richard Jordan, who argues that ministers should avoid populist interventions in favour of fiscal predictability. ‘One could instead merely tweak around the edges – remove reliefs and nudge up rates … become known as tinkerers rather than for shoot-from-the-hip populist economics.’
As David Lesperance of Lesperance & Associates says: ‘Treating the golden geese like a captive audience only gets them to consider flying away.’ The solution then is not to clip their wings but to foster an environment that makes them willing to stay.
