Despite efforts to stem the flow, wealthy individuals continue to leave the UK in significant numbers, with many heading to tax-friendly hubs like Dubai and Abu Dhabi, according to experts. Calls are growing for a complete reversal of the UK’s planned amendments to non-domiciled (non-dom) tax rules, which many believe are accelerating the exodus of high-net-worth individuals (HNWIs).

Experts warn that unless decisive changes are made, Labour risks further diminishing London’s appeal as a hub for business, investment, and high-profile legal disputes. “Even with some backpedaling, the Labour Party’s proposed reforms to the non-dom tax regime still risk driving wealthy individuals away,” said Karim A. Youssef, a prominent international arbitration lawyer.

Non-Dom Tax Changes: A Growing Concern

The non-dom status previously allowed wealthy individuals residing in the UK to avoid paying taxes on overseas income, as their permanent residence was considered abroad. Labour's manifesto, however, proposed abolishing this status to address tax system inequalities and fund public services.

Chancellor of the Exchequer Rachel Reeves recently signaled potential softening of these changes, particularly regarding the "temporary repatriation facility." This provision, originally set to last three years from April 2025, allows non-doms to bring overseas income into the UK at reduced tax rates. Speaking at the World Economic Forum in Davos, Reeves announced plans to make this facility more generous.

Tax advisors welcomed this adjustment but argued it doesn't go far enough. Youssef noted that removing tax advantages for non-doms, coupled with the introduction of the Foreign Income and Gains Regime and increased capital gains taxes, makes London significantly less attractive compared to rising hubs like the UAE and Singapore.

Wealth Exodus Intensifies

According to recent data, over 10,000 millionaires left the UK in 2024, a staggering 157% increase compared to 2023. The UK lost more wealthy residents than any other country last year, apart from China. Analysts attribute this trend to tax policies introduced after the Brexit vote in 2016, with the most significant outflow occurring in 2024.

Reeves acknowledged the concerns raised by the non-dom community, hinting at further "softening measures" in the finance bill. However, experts argue that without a full reversal of the proposed changes, the UK will struggle to retain HNWIs. “London’s global financial leadership relies on its ability to attract and retain wealthy individuals,” Youssef explained. “The UBS Global Wealth Report predicts a continued HNWI exodus, a trend I’m already witnessing among my clients.”

Opportunities for the UK

Some tax experts suggest the UK government could capitalize on Donald Trump’s presidency in the US to attract wealthy individuals back to the country. However, this would require reversing the controversial non-dom tax reforms to make the UK more appealing. Without such action, hubs like Dubai, Abu Dhabi, and Singapore are set to benefit as they continue to draw the super-wealthy seeking friendlier tax environments.