Chancellor Rachel Reeves’ plans to soften upcoming changes to non-dom tax rules to prevent a mass exodus of high-net-worth individuals ‘do not go far enough’, say wealth managers.
Speaking at the World Economic Forum in Davos, Reeves said she had listened to concerns and changes would be made to upcoming legislation.
It follows Reeves’ announcement in the Autumn Budget that from April 2025, the non-dom regime will be abolished and instead, a new residence-based regime will be introduced. This system will determine an individual’s UK tax liabilities based on their tax residency status rather than their domicile status. However, the changes have been met with concerns that are driving away international investors and damaging the economy.
Marc Acheson, global wealth specialist at Utmost Wealth Solutions, welcomed Reeves’ softened stance: “The measures announced at the Budget made the UK far less attractive to non-doms and created the perfect storm of many leaving and less coming in. Many of our clients have been exploring other jurisdictions in the EU and UAE. This community would rather not leave the UK and contribute significantly to the exchequer, so any review of those changes, particularly with reference to the erosion of IHT protections on existing settlements would be welcome.”
However, Mauro De Santis Bo, partner at GSB Wealth, warned that it may be “too late” to reverse the damage already caused by the Budget.
“Although this may look like it is going to help retain wealthy individuals who might otherwise move their funds elsewhere, I believe that is only helping those non-doms that are already thinking of staying and they have been lobbying intensively over the past months to make the new rules slightly more favourable for them.
“There’s no denying that the initial uncertainty and proposed tightening of the non-dom regime have already pushed some individuals to leave the UK or reconsider their long-term commitment to the country. Wealthy individuals value stability and clarity in tax policy, and many will have already acted on the earlier announcements, relocating funds or even themselves to jurisdictions with more predictable regimes.
“This softening can be seen as a positive step, but for those who have the decision of leaving or already left, it may be too late to reverse their decisions and I doubt this ‘softening’ will be enough to make them change their minds. Timing is everything, and a stronger, clearer commitment to welcoming global wealth sooner could have mitigated the damage.”
He said the UK now faced a challenge in rebuilding trust among this community and demonstrating that it can balance fiscal needs with a competitive, business-friendly environment.
Meanwhile, Jeremy Savory, CEO of Savory and Partners, said measures to stem the flow of wealth out of the country do not go far enough.
“The UK is right to review the proposed changes to non-dom status announced in the Budget, but measures shared so far will not go far enough to stem the flow of millionaires out of the country.
“The UK has a small window of opportunity to put in place a more competitive and attractive residency scheme for High Net Worths who are still attracted to the stability, established legal and governance systems and high education standards. However, the investment opportunity in the UK, an area that the Government is desperate to bolster, is waning and this is a chance for the Government to reconsider how it can support this. An important first step is allowing for a longer time frame, as four years is not long enough for most people’s plans, as well as a higher limit to the relief, which of course can have stipulations over the types of investments for maximum impact to the UK economy but will enable individuals to make significant decisions.”
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