Agencies
Living in London has become an expensive indulgence ultra-wealthy entrepreneur Bassim Haidar 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.
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 U.K. could obtain if they put non-U.K. assets into a trust within 15 years of moving to Britain.
Now the dust has settled on Labour’s return to power, Haidar wants Starmer and Treasury chief Rachel Reeves to rethink these plans and replace them with a new six-figure annual tax on people with a 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.
"The notion that the U.K. is simply too good to leave is incorrect,” the 53-year-old Nigerian-born, Lebanese citizen told Reuters.
"To be taxed so heavily on wealth generated outside Britain, perhaps years before people even moved to the U.K., is unfair,” he said, urging the government to sit down with globally mobile millionaires and discuss tax reforms that he said may put U.K. jobs at risk.
Organizations like Patriotic Millionaires U.K. are also campaigning to introduce annual wealth levies on the super-rich.
Setting a 2% tax at a threshold of 10 million pounds a year would impact around 20,000 people, but raise up to 24 billion pounds a year, the group estimates.
Investment firms, wealth managers and private bankers who provide financial services to around 70,000 U.K.-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.
"It is not possible to directly measure how much foreign income non-doms using the remittance basis have, and therefore what the potential tax base is,” the independent Institute for Fiscal Studies said in a report published in March.
Inheritance tax raised 2.1 billion pounds between April and June, 83 million pounds more than the same period a year earlier, U.K. tax authority data published this week showed.
Britain has around 37,000 non-doms who opt to be taxed on a "remittance basis.” This means U.K. taxes are not charged on their foreign income or capital gains unless they are remitted to the U.K.
According to the IFS, those people collectively paid about 6 billion pounds in U.K. income tax, National Insurance contributions and capital gains tax in 2020-21.
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 U.S. dollar millionaires by 2028, according to the UBS Global Wealth Report for 2024 published earlier this month.
The Swiss bank cited the high base number of super-rich in the U.K., the implications of the Russia-Ukraine war and the lesser effect of Britain’s decision to abolish its "non-dom” tax perks as reasons for the sharp fall.
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%.
In its March report, the IFS said there was "only limited evidence on how non-doms would respond to higher taxes.”