Why Millionaires Are Choosing to Leave the UK

Henley & Partners recently released The Henley Private Wealth Migration Report 2024, which revealed the UK is expectedto see a net loss of 9,500 millionaires in 2024. This is more than double the 4,200 that left the country last year.

The UK, and London especially, consistently attracted wealthy families from mainland Europe, Africa, Asia, and theMiddle East from the 1950s to early 2000s.

Jeremy Knowland, UK head of Citi Private Bank, said one of the reasons high net worth (HNW) and ultra-high net worth(UHNW) individuals have been drawn to London in the past is because it is a multicultural city.

“London is well known for welcoming people from around the world,” he said.

This trend began to reverse around a decade ago as more millionaires began to leave the country and fewer came in.Notably, during the six-year period after the Brexit referendum (from 2017 to 2023), the UK lost a total of 16,500millionaires to migration.

The UK has also previously had rules for non-domiciled individuals (non-doms) which attracted wealth.

Mr Knowland stated: “If you felt you were going to be here for a period of time and you hold some of your assets offshorein an appropriate way, it is appealing.”

However, these rules have been subject to change since the Conservatives announced plans to abolish the regime in theSpring Budget in March 2024.

Since then, Labour won the UK general election in July, promising to crack down on the non-dom tax “loop-hole” withharsher rules than the Conservative government originally proposed.

This included changes such as removing the 50 percent discount for non-doms bringing foreign income into the UK inthe fi rst year of the new rules.

At the time, it also said it would include foreign assets held in a trust within the UK inheritance tax framework.

This was supposed to raise £1 billion, helping to fi ll the £22 billion “black hole” the government said it found in theeconomy.

However, as Henley & Partners data suggested, the number of millionaires choosing to leave the country has beensteadily increasing and the lack of a meaningful tax incentive to stay is unlikely to help reverse this trend.

As a result of these fears and Treasury offi cials believing there is a possibility Labour's planned policy will fail to raise anymoney, professionals are expecting Labour to announce a watered down version of its original policy.

Professionals believe changes could be made to the inheritance tax protections currently in place for non-UK residenttrusts, with the possibility of grandfathering being introduced so the old rules will continue to apply to existing structures.However, nothing has yet been confi rmed.

According to Mark Clubb, executive chairman at Team, UHNW and HNW individuals were also initially drawn to the UKbecause they trusted the tax and legal system.

With all the uncertainty around the future of non-dom rules, Mr Clubb believes “there is no longer trust in the UK taxsystem”, another factor which is driving millionaires out of the UK.

He put this down to “complexity and unpredictability, tax avoidance crackdown and Brexit-related uncertainty”.

Mr Clubb stated the UK tax system has become “increasingly complex”, with frequent changes in laws and regulations.

This unpredictability creates uncertainty for individuals and businesses trying to plan their fi nances.

Although Sir Keir Starmer has vowed not to raise income tax, national insurance, or VAT, many wealth taxes remainoutside this pledge, such as exemptions and reliefs for inheritance tax, capital gains tax, and pensions.

Moreover, Mr Clubb believes high-profi le cases and “aggressive” measures against historically accepted tax planningtools like employee benefi t schemes have caused concern among wealthy UK residents.

While these measures aim to ensure fairness and reduce wealth inequality, they can also create an impression of ahostile environment for tax planning and wealthy individuals, Mr Clubb claimed.

“Furthermore, everyday tax avoidance schemes such as Pensions, ISAs, bond wrappers, and corporate structures mayoffer protection from a higher tax regime, but it's important to note that none are immune to future rule changes by thenew UK government, which could limit their benefi ts,” Mr Clubb warned.

In terms of Brexit, the UK's departure from the EU also introduced uncertainty and changes in the tax landscape.

This includes potential alterations in tax treaties and the overall business operating environment, leading toapprehensions about future stability.

The fi nancial services industry in the UK has undergone signifi cant change following Brexit.

Mr Knowland explained: “Paris has grown considerably and has become competition for London. We have seen manyfi nancial service professionals relocate to Europe, largely because the rules around how advice can be given. There arerestrictions now around providing advice to the EEA from the UK.”

With the UK likely to lose UHNW and HNW clients following the Autumn Budget, Mr Clubb believes some fi rms based inthe UK are “ill-prepared” for wealth leaving the UK.

This is because “it is much harder to expand to other jurisdictions now as the process is more complicated.”

In spite of the data released by Henley & Partners and the Treasury’s concern over losing HNW and UHNW individuals, MrKnowland stated that Citi bank had not experienced its non-dom clients – which typically have over £25 million in assets- expressing a desire to leave yet.

Although Mr Knowland said Citi bank had not felt the loss of non-domiciled clients, he concluded: “I would suspect wemay lose some [non-doms]. Truthfully, I hope not.”

SOPHIA PANAYI, 09/10/2024