Tax issues may lead millionaires to leave UK

For ultra-wealthy entrepreneur Bassim Haidar, living in London has become an expensive indulgence he can no longer justify.

While new British Prime Minister Keir Starmer settles into No. 10 Downing St, Haidar is searching for homes in Greece and Monaco, because a proposed inheritance tax revamp will make Britain a ‘no go’ zone for the rich, he says.

Starmer says the overhaul will make Britain’s tax system fairer and raise funds for stretched public services. While supportive of some reform, Haidar says the proposed changes could harm the economy if international business owners choose to quit Britain, or avoid moving here, undermining its reputation as an incubator for fledgling firms, according to a Reuters report.

The recently ousted Conservative government outlined surprise plans in March to phase out Britain’s centuries-old ‘non dom’ tax regime, which spares wealthy individuals from paying tax on income earned overseas.

But in the run-up to its July 4 election win, Starmer’s left-leaning Labour party pledged to also scrap permanent reliefs ‘non doms’ born outside the UK could obtain if they put non-UK assets into a trust within 15 years of moving to Britain. Now that the dust has settled on Labour’s return to power, Haidar wants Starmer and finance minister Rachel Reeves to rethink these plans, and to replace them with a new six-figure annual tax on people with net worth in excess of 5 million pounds ($6.52 million).

Haidar estimates a 150,000-pound levy could raise an additional 4 billion pounds a year for the government, boosting state coffers without triggering an exodus of the non-dom wealthy. Investment firms, wealth managers and private bankers who provide financial services to around 70,000 UK-based individuals with ‘non-dom’ status are on high alert for when the historic tax overhaul might begin.

The Labour government reckons it can raise an extra 5 billion pounds a year by tackling domestic tax avoidance. Assessing how much more could be raised by changing tax perks on offshore trusts is more difficult.

Threats by the wealthy to quit unfriendly tax regimes are far from new, and some wealth advisers say London’s status as a culturally diverse city with world-class schools will ultimately persuade the well-heeled to acquiesce. But a desire to shield his family wealth for future generations far outweighed the inconvenience of moving to another country, Haidar said. Britain is likely to lose nearly one in six of its US dollar millionaires by 2028, according to the UBS Global Wealth Report for 2024 published earlier this month.

UBS forecast the number of dollar millionaires in Britain would fall by 17% to around 2.5 million in 2028. In contrast, the total of dollar millionaires in the United States and in France was forecast to rise by 16% by 2028, in Germany by 14%, in Spain by 12% and in Italy by 9%.

Proposals to tighten taxation loopholes which benefit the wealthy come as UK financial regulators redouble efforts to make Britain more attractive to global companies and investors. Last week Britain’s Financial Conduct Authority unveiled a revamp of corporate listing rules aimed at enticing owners of promising private firms to go public on the London Stock Exchange.

But Haidar has mothballed plans to list his financial services firm Optasia in Britain and begun talks with alternative listing venues in countries with more favourable tax regimes.

David Lesperance, managing director of tax adviser Lesperance & Associates, told Reuters the government should not underestimate the ease and pace at which wealthy families could quit the UK. Several of his clients were considering relocation to as many as 17 alternative tax jurisdictions, including Ireland, Malta and Portugal. “Wealth does not stay still anymore. It doesn’t have to. The golden geese have wings and they will fly,” he said.