The UK’s recent non-dom tax reforms have sparked widespread debate.

This highlights significant implications for ultra-high-net-worth individuals (UHNWIs), high-net-worth individuals (HNWIs), and the economic ecosystems they support.

These reforms replace the traditional domicile-based taxation system with a residency-based model, impacting inheritance tax (IHT) and taxation on foreign income and gains.

While aimed at increasing fiscal fairness, these changes could inadvertently disrupt key contributors to the UK economy.

Economic Contributions at Risk

Non-doms are pivotal to the UK economy, contributing billions in investments, taxes, and philanthropic initiatives.

According to a report by Oxford Economics, surveyed non-doms invest an average of £118 million per individual in the UK, supporting over 15,000 jobs.

Additionally, their philanthropy averages £5.8 million per respondent, funding education, arts, and community initiatives. The reforms, however, are already changing this narrative.

Case studies reveal that if the proposed IHT rules are implemented, many non-doms plan to leave the UK within two years.

For example, a prominent entrepreneur in renewable energy stated to relocate over £200 million in planned investments if they emigrated. ⁽¹⁾

Similarly, family offices, which are essential in financing UK-based innovation, are reconsidering their presence in light of the heightened tax burden.

Migration Trends

Expectations are for the non-dom tax reforms to drive a demographic shift among wealthy residents.

A staggering 63% of surveyed non-doms indicated plans to leave the UK due to the reforms, with new arrivals deterred by stricter rules.

The Henley Private Wealth Migration Report estimates a net loss of 9,500 millionaires in 2024 alone, signalling long-term economic repercussions.

As migration increases, London risks losing its status as a global hub for investment and innovation.

Conclusion

While the intent of these reforms is to foster equity, the potential fallout for investments, jobs, and philanthropy calls for careful reconsideration.

Policymakers must engage with stakeholders to craft solutions that balance fairness with economic competitiveness, such as tiered tax regimes or transitional arrangements.

Cover image by @vwalakte on Freepik

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