Experts warn that the UK government must fully revoke its controversial tax policies to prevent London’s decline as a prime hub for business, investment, and high-stakes legal matters. Without decisive action, Labour’s current approach could further accelerate the exodus of high-net-worth individuals (HNWIs) from the country.
UAE: A Growing Destination for the UK’s Super Wealthy
Dubai and Abu Dhabi are poised to welcome an increasing number of UK millionaires as the outflow of wealth continues unabated. Despite the Labour government’s recent reconsideration of its non-dom tax regulations, experts believe these amendments are insufficient to halt the trend.
Calls for a complete reversal of these policies are growing, with some experts emphasizing the need to attract and retain wealth in the UK, particularly in light of political shifts such as Donald Trump’s presidency in the United States.
Adjustments to Non-Dom Tax Rules: A Partial Softening
Chancellor of the Exchequer Rachel Reeves recently indicated a possible modification of the UK’s non-dom tax rules, specifically those affecting the “temporary repatriation facility.” Initially designed to last three years from April 2025, this transition period allows non-doms to bring overseas income into the UK at a reduced tax rate. Speaking at the World Economic Forum in Davos, Reeves stated plans to make the arrangement more generous.
While this move suggests some backtracking on the UK government’s stance, legal and financial experts argue that Labour’s proposed changes, even with Reeves’ adjustments, still pose a significant risk of driving wealthy individuals away from London.
London’s Loss, Dubai’s Gain
Karim A. Youssef, a London-based arbitration lawyer and dispute resolution expert, highlighted the growing trend of HNWIs relocating to more tax-friendly jurisdictions. “As an international arbitration lawyer working between Cairo and London, I’ve observed a notable increase in clients shifting from London to hubs like Dubai, Abu Dhabi, and Singapore. Where my clients go, their wealth follows,” he stated.
Before these proposed amendments, non-dom status allowed wealthy individuals living in the UK to avoid taxation on foreign income due to their permanent residence being classified outside the country. Labour’s manifesto, however, pledged to abolish this status to address what it views as tax system inequities and generate funds for public services.
Non-Dom Rules Face Criticism
Reeves’ announcement has received mixed reactions. While tax advisors welcomed the potential softening of policies, they argue that the UK government must take further steps to retain its financial elite. Youssef noted that merely easing restrictions will not be enough to counteract the flight of wealth.
The introduction of the ‘Foreign Income and Gains Regime,’ coupled with increased capital gains taxes, has significantly heightened the tax burden for HNWIs. “These measures make London far less attractive compared to emerging financial hubs like the UAE and Singapore,” Youssef explained. He further pointed to the UBS Global Wealth Report, which predicts a substantial exodus of HNWIs from the UK, a trend already evident among his clients.
Rising Concerns Over Wealth Exodus
Tax experts suggest that Reeves’ recent comments on modifying non-dom tax rules reflect growing concerns within the UK government regarding the mass departure of millionaires. Reeves acknowledged in an interview with the Wall Street Journal that the government has been listening to the concerns raised by the non-dom community.
The urgency of the situation is underscored by data indicating that over 10,000 millionaires left the UK in 2024, marking a staggering 157% increase from 2023. Analysts note that aside from China, the UK experienced the highest net loss of wealthy residents last year.
Brexit and Global Economic Shifts
Studies conducted by global analytics firm New World Health and investment migration advisers Henley & Partners reveal that the UK has been experiencing a net outflow of millionaires since the Brexit referendum in 2016. However, the most significant wealth drain occurred in the past year.
Some tax experts believe that political shifts in the US, such as Donald Trump’s presidency, could present an opportunity for the UK government to reverse the trend. By repealing controversial tax amendments related to non-dom status, the UK could potentially attract both returning and new wealthy individuals, mitigating further economic damage.
Published On : 28 Jan 2025
Source: https://www.arabianbusiness.com/politics-economics/uk-millionaires-head-for-dubai-abu-dhabi-despite-attempts-to-slow-exodus-experts-say
