Non-Dom Non-Sense
Scrapping the non-dom tax regime, only to fudge its replacement, is an economically senseless, political move. Such a move, initiated by the previous government, ignored the available evidence and will only accelerate the exodus of wealthy individuals from the UK. By definition, globally mobile, remittance basis non-doms don’t have anywhere near the level of ‘life inertia’ which barely anchors the domiciled wealthy to our shores. Emigration to Switzerland – with its favourable forfeit system – or Italy – with its €200,000 flat fee – is a very real option, particularly for the richest non-doms.
And yes, it’s not just about tax – from top class universities to the City of London, the UK has abundant natural advantages which will always have their lustre. But crime is high, public services are on their knees, and with an already high tax burden, the scrapping of the non-dom regime could push people over the edge.
This is bad news for the country, particularly given that millionaires who up-sticks will no longer have investment home-bias to the UK. We’ll have less productivity enhancing investment, job-creating spending, and wealthy tax contributors (the average non-dom pays £120,000 in income tax p.a). It seems odd that the government would bite the hand that feeds it, particularly as non-dom tax receipts hit record highs, already generating £8.9 billion a year. Government estimates that the changes will raise £3.2bn in extra revenue, of course account little for the change in behaviour that the policy seems almost actively seeking to engender.
The most harmful single aspect of the Government’s changes appears to be the imposition of inheritance tax on the worldwide assets of non-doms, for as long as 10 years after they have left the country. In a survey by Oxford Economics, this was cited by 80% of non-doms and 57% of their advisors as the main reason for considering relocation. For a government which had the sense to rule out an exit tax on the capital gains of wealthy people leaving the UK, it seems strange that they are willing to implement the ultimate exit tax – one on death – which is referenced as the biggest reason to get out of the country before April 2025 and will no doubt discourage new inward HNW migration. The prize? A supposed £430 million boost in tax revenue to squander on bat tunnels.