UK's Wealth Exodus to Seal Labour's Fate

KEY POINTS:

• U.K. Chancellor of the Exchequer Rachel Reeves abolished the country’s tax exemption on offshore trusts.

  
  

• Literally overnight it turned the UK into one of the most expensive places in the world to die.

  
  

• Among the 11,000 millionaires and billionaires to leave the UK annually are Richard Gnodde, vice chairman of Goldman Sachs, and Nassef Sawiris, Egypt’s richest man.

  
  

  

  Image Credit Reuters

A growing number of HNWI are signalling their intention to relocate from the UK this year as concerns over tax and pension reforms prompt an exodus.

The wealth management industry is flagging a major shift in the tax domicile status of up to 26% of the UK’s millionaires over the next 12 months. The projected 16,500 high net worth individuals are expected to exit the UK taking within them nearly £92bn in investable (and taxable) assets. 

Alarmingly, the numbers are even higher when taking into account very high net worths, those holding more than £5mn in investable assets. The deepening unease is palpable amongst the countries wealthiest residents, said the Savanta MillVue Q1 2025 survey. 

The tax and pension changes introduced by the Labour government are the main concern of the wealthy as many now weigh up the attractions of more tax efficient locations. For many, the decision is as much about financials as it is lifestyle preference. 

The inclusion of pensions in inheritance tax (IHT), the government’s new tax regime including capital gains and stamp duty changes are some of the factors behind the exodus.

The Labour government has also decided to close a loophole that allowed non-doms the use of offshore trusts to avoid inheritance tax, which means their worldwide assets are now exposed to the tax at 40 per cent under rules that came into force in April. 

This has caused many to leave the UK for more tax-friendly regimes such as the United Arab Emirates, Italy and Switzerland.

Laying the Foundations for Labour’s Exit

The mass exodus of many self-made entrepreneurs could hit innovation and lead to a ripple effect that undermines the UK’s longterm prosperity. 

It is not just the foregone taxes such people would have paid that will hurt. Thousands of jobs in sectors like retail, hospitality, legal services and luxury goods depend on the continued presence in the U.K. of the former non-doms. Scores of charities, cultural and sporting institutions depend on their patronage and philanthropy. There would therefore be a much broader impact than just the fiscal one.

Belatedly, the government has realized it has a problem. Unfortunately, it is probably too late to lure back those non-doms who have already gone, along with others who have left due to the imposition of VAT on school fees and changes in agricultural property relief and business property relief that exposed previously exempt estates and businesses to inheritance tax for the first time.