The UK is currently experiencing a significant outflow of affluent residents who are making preparations to leave the country ahead of the general election on July 4. The reason for this abrupt departure is the concern over a substantial 1,000% increase in inheritance tax if the Labour Party emerges victorious in the upcoming election.
According to a report by the reputable business website Bloomberg, foreign billionaires, City of London financiers, and wealthy Britons are all taking extreme measures to protect their wealth in light of the possibility of a Labour Party triumph next month. This includes liquidating their investments and relocating outside the UK in order to evade the impending tax reform.
Prime Minister Rishi Sunak has expressed apprehensions about the potential impact of a Labour victory on taxation, warning that the average citizen could potentially face an extra tax burden of £2,000 per year. However, for the ultra-wealthy, the stakes are higher, with some individuals potentially facing tax liabilities amounting to hundreds of millions of pounds to the Treasury if they do not take preemptive action.
The anticipated changes are not confined solely to Labour, as both the Conservative and Labour parties have indicated intentions to abolish favorable tax treatment for non-domiciled residents post-election. The term “non-doms” refers to prosperous foreign residents residing in the UK but considering another country their permanent residence for tax purposes. This implies that they are only taxed on income earned within the UK and are exempt from paying taxes on income generated elsewhere in the world.
Chancellor Jeremy Hunt’s announcement of new taxes on non-doms has ignited concerns within this demographic, as it signifies a significant shift in the tax treatment of their global assets. For example, affluent non-doms are anxious about the prospect of facing an unprecedented 1,000% hike in inheritance tax, amounting to £400 million, up from the current 40% levy on their assets.
In response to these apprehensions, private jets are being prepared for departure, with destinations such as Monaco, Dubai, and Switzerland becoming increasingly popular among those seeking lower tax rates and more favorable living conditions. EU countries like Italy and Greece are also garnering attention from departing UK residents due to their “golden visa” programs.
The proposed changes extend beyond inheritance tax as Labour also intends to eliminate the VAT exemption for private school fees and impose taxes on the private equity industry. These measures are projected to generate an additional £3 billion in revenue, however, it may come at the expense of driving away substantial wealth and talent from the UK.
Individuals who choose to remain in the UK are taking proactive measures to shield their assets from the anticipated tax surge. This includes making upfront payments for private school fees and selling properties to mitigate the potential impact of increased capital gains tax on second homes.
While it may be tempting to bid farewell to the wealthy elite due to their reluctance to pay taxes, it is crucial to consider the broader implications of their departure. The loss of tax revenue, business investments, job opportunities, and consumer spending could have an adverse effect on the UK economy and result in higher tax burdens for ordinary citizens. As both Labour and the Tories seek to levy taxes on the super-rich, the unintended consequence may be that everyone ends up bearing the cost.
As the UK prepares for a potentially transformative election, the impact of these changes on the country’s economic landscape remains to be seen.