Under the impact of tax changes, London's luxury real estate market and popular destinations are reshaping.
Faced with major tax changes proposed by the Labour Party, the UK's ultra-rich are on the verge of leaving the country en masse, seeking refuge in more tax-friendly destinations such as Switzerland, Monaco, Italy, Greece, Malta, Dubai and the Caribbean islands. This potential reform, which aims to abolish the special tax regime for non-domiciles (non-doms), could generate a mass exodus, according to advisors and research organizations.
For more than two centuries, the non-dom regime has allowed UK residents domiciled elsewhere to pay no tax on income and capital gains earned abroad for up to 15 years. In 2023, around 74,000 people benefited from this status, up from 68,900 the previous year.
Labor's plans, unveiled last month, aim not only to abolish this status, but also to replace the concept of "domicile" with a residence-based system, reducing the period during which income earned abroad is not taxed in the UK from 15 to four years. In addition, individuals will also have to pay inheritance tax after 10 years of residence in the UK, and will remain liable for 10 years after leaving.
According to a recent survey by Oxford Economics, carried out in conjunction with pressure group Foreign Investors for Britain, almost all non-doms (98%) surveyed said they would consider leaving the UK sooner rather than later if these reforms were implemented. The survey also reveals that these non-doms each inject an average of £118 million into the UK economy.
The main motivations cited for leaving the UK include inheritance tax on global assets, cited by 83% of those surveyed, as well as changes to income and capital gains taxes, mentioned by 65%. These changes have shaken the UK's reputation as a safe haven, already damaged by years of post-Brexit political turbulence.
The impact of these reforms is not just limited to the exodus of the ultra-rich, but is also affecting London's super-prime property market. According to analysis by Knight Frank, transactions for homes valued at over £10 million fell by 22% in the year to July, compared with the previous 12 months.
However, this situation creates opportunities for other investors. For example, US citizens, already subject to worldwide taxation in the USA, could benefit from reduced competition. Similarly, those staying less than 90 days a year in the UK could benefit from more favorable tax thresholds.
Labor's proposed changes aim to improve fairness and strengthen the public finances, a laudable move, but one that experts say could cost UK taxpayers up to £1 billion by 2029/30, at odds with initial forecasts of £2.6 billion in additional revenue.
Photo : Tolu Akinyemi 🇳🇬 on Unsplash
This post was translated from the original French.