Non-doms fleeing already as exodus of wealthy begins

Tax advisers inundated with calls from those planning to leave after Hunt’s ‘short-termist’ move

TAX lawyers have been inundated with phone calls from non-doms planning to leave Britain after Jeremy Hunt announced a crackdown in the Budget.

Members of the international elite attacked the Chancellor’s plan to scrap the tax status as “arrogant” and “short-termist”, and began drawing up plans to move away within hours of the change being announced.

Christopher Groves, a partner at international law firm Withers, said: “The phones started to ring yesterday as soon as the announcement came out. Lots of people are trying to work out what it means for them.”

Mr Groves said that one non-dom client, who is based in the UK with a large international business, instantly got in touch via Whatsapp. In a message, the client said: “It’s really bad. Arrogant and short-termist and very damaging to the UK’S image as a good place for international wealth creators. How could anyone with serious wealth ever consider coming and putting down roots in the UK. So stupid.”

The client is in the process of expanding their international business in the UK but is now questioning his choices.

Mr Groves said: “He thought this would be a good place to be. But he’s now thinking about whether or not he’s made the right decision.”

Mark Davies, of Mark Davies & Associates, a tax adviser specialising in nondoms, said his clients had been stunned by the announcement. He said: “The universal immediate reaction is ‘when do I have to leave and where shall I go?’”

James Ward, of law firm Kingsley Napley, said even before the announcement a number of his clients were already in the process of leaving. He said: “There is a sense that there’s been a systematic downturn in London. Private schools may be taxed under Labour, business flights are being taxed more. Everything that was making the UK attractive to the wealthy is being dismantled.”

Unlike Uk-domiciled people, individuals who live in Britain but have a permanent home elsewhere can avoid paying tax on foreign income and gains. But from April 2025, new arrivals into the country will benefit from this tax break for just four years before they must pay the same taxes as UK domiciles.

Others already based here will face huge tax rises as soon as the new regime comes into effect.

An estimated 5,500 non-doms are ineligible for the four-year tax break, according to government figures, and will instantly face tax rises when the rules change next year. The Office for Budget Responsibility has forecast that overhauling the regime will raise around £3billion annually.

Helen Miller, of the Institute for Fiscal Studies, said: “That is not a huge number in public finance terms, but for a small group of losers that is an extremely big per person tax increase. We are talking about tax increases of hundreds of thousands of pounds just on average, per person.”

The number of non-doms in the UK has plummeted from 85,000 to 55,000 since 2017, when the government changed the rules so the status could no longer be held permanently.

Many non-doms set up trusts after the 2017 reforms to protect their wealth.

But in yesterday’s Budget Mr Hunt ruled that from April 2025, these protections will no longer apply.

Economists who support the nondom regime have argued that by diluting it Britain risks losing talent from the financial services industry as well as business owners and investors.

On top of this, the country will lose the tax paid on UK income and assets by any departing non-doms. Under the current rules, non-doms also start paying a tax charge of either £30,000 or £60,000 once they have been in the country for more than seven years, and this money will no longer be collected.

The Chancellor has introduced a number of measures designed to keep non-doms in the country – including a low 12 per cent tax rate on money brought into the UK between 2025 and 2027. But Alex Ruffel, of law firm Irwin Mitchell, said: “These attempts to cushion the blow may be enough for some. For others, particularly those who might find their worldwide assets within inheritance tax from 2025, they will not be enough and we anticipate they will depart the UK in the next 12 months.”