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Wealthy foreigners are already fleeing Britain over fears Labour will send a Tory crackdown on “non-doms” into overdrive.
Bassim Haidar, a Lebanese-Nigerian entrepreneur who has lived periodically in Britain since 2010, told Telegraph Money that he and his family had decided to move abroad because of the country’s increasingly hostile tax environment.
Mr Haidar is one of 68,800 “non-doms”, who live in Britain but avoid paying UK tax on money they make overseas.
Jeremy Hunt announced he would abolish non-dom status in the 2024 Budget. Rachel Reeves, the shadow chancellor, said in April that Labour would go further and close a loophole that gives non-doms until April 2025 to put overseas funds into a trust.
These funds would be exempt from inheritance tax under Conservative plans. Labour said it would raise £430m a year by removing the exemption.
However, Mr Haidar warned that Britain will be hit by a “brain drain” if the crackdown continues, as wealthy foreigners take their businesses and tax revenue abroad.
He said: “We’re definitely planning to leave. Everything has been put in place.
“The main reason we’re leaving is that the [non-dom] system has been working fine for 20 years.
“The fairness of the system has come into question in the last few elections – that’s fair enough. But most people don’t understand non-doms – they think if you’re rich you don’t pay tax. This is far from the case.
“We pay tax on any money we generate in the UK. But we built businesses abroad which were protected under non-dom status. To pay tax on global assets is a no go.”
Three in 10 people who earn £5m or more claim non-dom status, compared to fewer than three in 1,000 among those earning less than £100,000.
The Office for Budget Responsibility, the official forecaster, expects up to 20pc of non-doms to leave the UK because of the tax raid.
Mr Haidar, who has a net worth of several hundred million pounds, said uncertainty about what a potential Labour government was planning had factored into his decision.
“The question is what will replace the non-dom regime – will it be related to how much time you spend here? Is it going to be a flat tax?”
He added that he would be “happy to pay a flat rate of £200,000 a year” – double the rate levied in Italy or Greece on income generated overseas.
“I’m sure my other non-dom friends would also be happy to pay this.
“It’s not about paying no tax – I want to pay fair tax. But paying tax on millions and millions each year that has nothing to do with the UK is wrong.”
Mr Haidar has calculated that it would cost him between £10m and £12m a year to remain in Britain.
Among the destinations Mr Haidar is weighing up are Monaco and Dubai, both tax-free hotspots popular with the super-rich.
“Taxes are very high in the UK currently – but removing non-dom makes it extremely punitive and uncompetitive compared to the US or the rest of Europe.
“The whole idea after Brexit was that the UK would be made more competitive, but I’ve seen this getting worse.
“Italy, Spain, Greece, and Ireland are offering a flat tax system which is competitive and exciting – I know a few [non-dom] friends who have already moved to Dubai, Monaco and Italy.
“The idea that there is nowhere else to go is not untrue – there will be a brain drain from Britain as a result.”
High-end tax and wealth advisers have confirmed that non-doms are moving abroad.
Jon Elphick, international tax adviser at Mark Davies & Associates, said the combination of rule changes under the Tories and the uncertainty of a possible Labour government had been “the final nail in the coffin”.
He added: “The mood among clients is disillusionment. We’ve experienced a significant uplift in clients asking about relocations – and what their tax positions would look like if they were to move.”
One of Mr Elphicke’s clients, a non-dom of European nationality, moved to the UK five years ago to set up a trading consultancy with their partner, also a non-dom.
But the hostility towards non-doms from Britain’s two main parties prompted the couple to shut down the company and relocate to Dubai.
“They can provide their services anywhere and the tax environment has become too hostile. They terminated their office lease and the employees lost their jobs.”
Unlike UK-domiciled residents, individuals who live in Britain but have a permanent home elsewhere can avoid paying tax on foreign income and gains.
But from April 2025, new arrivals into the country will benefit from this tax break for just four years before they must pay the same taxes as UK domiciles.
Others already based here will face huge tax rises as soon as the new regime comes into effect.
An estimated 5,500 current non-doms are ineligible for the four-year tax break, according to government figures, and will instantly face tax rises when the rules change next year.
Labour’s planned VAT raid on private schools – which could see fees rising by 20pc as soon as September – is also factoring into some non-doms’ decision-making, Mr Elphicke said.
“I have clients who are saying: ‘We would have stayed here to school our kids but it’s going to be significantly more expensive now, so we don’t know if its worth it.’”
Another of Mr Elphicke’s clients, an Israeli businessman, said they had “had enough” of changes to Britain’s tax system and had decided to move to Monaco, Switzerland or Dubai.
He added: “This is someone who pays £13m of income tax and capital gains tax a year in Britain and they’ve done this for 15 years.”
Mr Elphicke blamed the “constant changes” to the non-dom regime over the last 20 years.
“You can trace it back to the non-dom rule changes in 2008 and 2017, as well as Brexit. It creates uncertainty. It’s not just Labour to blame.”
Matthew Braithwaite, of law firm Wedlake Bell, said some of his non-dom clients no longer felt welcome in Britain.
“People are leaving – whether over the rules themselves or the uncertainty, and the rhetoric from the Labour Party won’t be helping that. People are reading into the fact the party is not saying a lot.
“Others are actively making plans to move – for some it’s just a case of spending fewer days in the UK [every year] than they might otherwise have done.
He added that some non-doms were feeling “confused and frustrated” because they had already carried out “legitimate estate planning within the rules” which allowed them to live in Britain, but their plans were being “undermined”.
“Others are disenchanted – they want to stay in the UK, but don’t feel like they’re welcome.”
Mr Haidar said moving would be “very disruptive” to his family life, who feel settled in Britain.
“We love the UK. We’ve absorbed the whole culture and love the place, but when a system is punishing you for the mere fact you live there, we’ve got to make the best decision for our families. We’re sad we’re leaving but it’s best that we leave.”
