The UK’s rich, from foreign billionaires to City of London bankers, are rushing to hide their money after Prime Minister Rishi Sunak surprised the country by calling a summer election.
Some are cashing in investments, paying off bills that may soon mount, or leaving the UK altogether, according to interviews with more than two dozen high net worth people, who asked not to be named, and wealth advisers.
Both the ruling Conservatives and opposition Labor have pledged to end preferential tax treatment for non-residents – wealthy foreigners living in the UK, also known as non-domestics. Labor leader Keir Starmer has further plans to tax the rich and polls show his party leading by more than 20 points.
“I’ve had clients before who hesitated, went into panic mode,” said David Lesperance, a Poland-based tax and immigration adviser to the ultra-wealthy at Sunak, who called the July 4 vote. “He pulled the pin on the election grenade”.
The UK was expected to lose a net 3,200 high net worth individuals last year, the most in Europe and double the level in 2022, estimates citizenship consultancy Henley & Partners. Britain’s reputation for legal and political stability has been shaken by the upheaval of Brexit and the replacement of five different Conservative prime ministers since 2016.
As well as losing ground to popular territories such as Monaco, Dubai and Switzerland, it has also had to compete with European neighbors such as Italy and Greece, which have introduced programs to attract wealthy foreigners. The UK has scrapped its so-called golden visa program in 2022.
“If these changes go ahead as announced, it will be a serious and entirely unavoidable mistake,” said Dominic Lawrance, a London-based partner at global law firm Charles Russell Speechlys.
https://x.com/Keir_Starmer/status/1736794624969101540
Labor also wants to add taxes on private equity professionals and private school fees. As part of his non-dom proposal, he aims to remove inheritance tax exemptions for overseas assets held in trust structures. The idea of ​​this big change helped raise the price of insurance to cover potential levies from wealthy estates.
Notable non-homes
Non-dom status dates back to 1799, when it was introduced to protect colonial investments. Recent notable non-houses include former HSBC Holdings Plc chief executive Stuart Gulliver and former Conservative Party deputy leader Michael Ashcroft.
Sunak’s wife, Akshata Murty was also revealed in 2022 to benefit from the status. After the media firestorm, Murty said she would pay UK taxes on her global income, partly derived from Indian software giant Infosys Ltd.
Labor leaders have previously estimated they could raise about 3 billion pounds ($3.8 billion) by scrapping the regime, matching recent academic research that predicted fewer than 100 wealthy foreigners with the status would eventually leave the country.
The number of nondomes is already falling, falling by almost half to 68,800 in the decade to 2022, thanks in part to an earlier rule change to permanently bar individuals from using the benefit. Yet those who retain that status pay more than £8bn a year in UK tax, according to the latest official figures.
The One City law firm has received more than three dozen inquiries in the past few months about non-dom conversions, from multi-billionaires to multi-hundred-millionaires, according to people familiar with the matter. One person has now gone to Switzerland, while another is preparing to move to Italy, said the people, who asked not to be identified because the details are private.
One former London-based hedge fund manager originally from the UK is moving to another European country, partly out of frustration with the political direction of the two major parties. Another very wealthy British citizen with property investments is similarly considering ways to transition from living full-time in the UK for just three months a year, spending the balance between low-tax territories such as Dubai and Monaco.
Simon Goldring, tax and trust adviser to the ultra-wealthy at global law firm Ogier, said he had several live cases of British residents looking to move overseas, mostly from British citizens frustrated by taxes reaching post-war highs.
“They are fed up,” added Goldring, who himself moved to Dubai last year from the UK. “It’s a sad accusation.
Ahead of the 2019 election, the threat of left-wing Labor leader Jeremy Corbyn helped push some of Britain’s wealthiest individuals out. Jim Ratcliffe, the billionaire founder of chemical giant Ineos, said this was a factor in his relocation around 2018 to Monaco, where residents face no income or capital gains taxes.
However, Starmer made more of an effort to appeal to this demographic. Iceland Foods founder Malcolm Walker and former managing director of JPMorgan Chase & Co. Charles Harman were among 120 business leaders who signed a letter of support for Labor last week.
For a “mass affluent” cohort of Britons, the election has accelerated demand to future-proof their finances, wealth advisers say.
While neither party has yet published their manifestos, Starmer has said he will impose a 20% value added tax on private school fees to raise £1.7 billion for the state’s education system. This is forcing some deep-pocketed parents to consider paying annual fees – which can be as high as £65,000 a year – to avoid these extra costs.
“I have friends in this scenario,” said Ben Yearsley, an investment consultant at Fairview Investing in Bristol. “They’re looking at the value of a two-year prepayment,” he added.
The UK’s political ups and downs are also discouraging wealthy foreigners from coming to the country.
One high-purity Middle Eastern individual, who asked to remain anonymous, has advance plans to move his family from Monaco to London as his children approach school age. The billionaire wealth manager said clients are pulling away from UK investments for now, particularly in the property sector often favored by the super-rich.
Lesperance, a former non-dom in Britain in the late 1990s, said one billionaire client’s trust would increase his UK inheritance tax liability by more than 1,000% to around £400m because of Labour’s non-dom reforms.
“We’re refueling the engines,” he said. “And we have clearance to land.