The majority of Britain’s super-rich are actively considering whether to leave the country. The reason for this is not so much the level of taxes, but the fact that, in their opinion, the government is unable to create a stable budget framework.
A survey of 200 multi-millionaires, each with personal assets of at least £50 million, carried out by accountancy firm BDO, found that two-thirds had considered moving in the last 12 months. The most striking finding, however, was the reason: 42 percent cited inconsistent tax policy as the main reason for their considerations, while only 18 percent cited high tax rates alone.
The distinction is important. Britain has long charged tax rates comparable to or higher than those of its European neighbors, but the ultra-rich have historically stayed put. What appears to have changed the calculus is a series of policy reversals and threatened reforms under Labor, particularly in the areas of inheritance and capital gains tax, which have left wealthy individuals unable to plan with confidence.
Elsa Littlewood, tax partner at BDO, said many of those considering leaving would prefer to stay but feel unable to manage long-term wealth planning in such an unpredictable backdrop.
Since Labour’s inauguration, a series of high-profile departures have underlined this trend. Hedge fund manager Michael Platt moved his family office to Dubai. Norwegian-born shipowner John Fredriksen has put his £250 million Chelsea townhouse on the market. Richard Gnodde, formerly Goldman Sachs’ most senior banker in Europe, moved to Milan, while brothers Ian and Richard Livingstone moved their primary residence to Monaco. Indian billionaire Lakshmi Mittal, who has lived in Britain for almost three decades, also moved to Dubai, as did Egyptian businessman Nassef Sawiris.
The exodus began in earnest when Rachel Reeves, upon becoming chancellor, abolished non-domiciled status, a long-standing tax system that had made Britain attractive to internationally mobile wealth. The proposal to impose a 40 percent inheritance tax on global wealth sparked such fierce opposition that it was subsequently scaled back, but by then confidence had already been shaken.
Ms Reeves’ second budget in November exacerbated the uncertainty. After hinting at possible capital gains tax increases, she ultimately left capital gains tax largely untouched, but increased rates on savings and dividends and introduced what critics called a “mansion tax” on higher-value properties, a series of measures that few had expected.
Maxwell Marlow, director at the Adam Smith Institute, warned that the lack of a replacement system to attract the capital and spending of wealthy investors to Britain meant the wider population would bear the costs.
For Daily Sparkz readers who run or advise companies that rely on access to high net worth capital, the message from BDO research is clear: it is not the size of the tax bill that puts people off, but the inability to know what that bill will look like next year. Certainty, it seems, has become the scarcest commodity in British fiscal policy.
