The United Kingdom has some bad news for ultra-wealthy foreigners: If you live in Britain, you’re going to be taxed.
England plans to end its tax breaks for so called “non-doms,” which allowed some of its UNHW foreign residents to avoid paying tax for up to 15 years. The announcement was made by Rachel Reeves, the chancellor of the exchequer, during her first budget since the Labour party took power, Bloomberg reported on Wednesday. By ending that program, the U.K. could raise an extra $16.5 billion over the next five years.
“We will remove the outdated concept of domicile from the tax system from April 2025,” Reeves said, according to Bloomberg. “I have always said that if you make Britain your home, you should pay your taxes here, too.”
Instead of the non-dom tax breaks, the U.K. will use a residence-based program, with competitive arrangements offered to wealthy foreigners who are moving to the country only temporarily. The prior Conservative government had said that it would make similar changes, and it put into place a temporary repatriation facility that let non-doms bring in foreign income and gains at a 12 percent tax rate for two years, up until April 2027. Reeves said that she will extend that to three years.
The new tax has been discussed for a while in England, and some worry that it may scare away high-earners from moving to the country. “The notion that the U.K. is simply too good to leave is incorrect,” the entrepreneur Bassim Haidar told Reuters back in July. “To be taxed so heavily on wealth generated outside Britain, perhaps years before people even moved to the U.K., is unfair.”
And even without the new tax regime, analysts have predicted that high-net-worth individuals are set to flee the U.K. In June, a Henley & Partners report said that 9,500 people worth $1 million or more could depart England just this year. And in August, a survey from the consultancy Arton Capital showed that almost half of millionaires in the U.K. would leave the country following its recent election.
With changes to the tax system now official, it remains to be seen whether HNWIs will pack their bags and take their money or stick it out and accept the change as a contribution to the British economy.
Authors
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Tori Latham