Dubai and Abu Dhabi can hope to welcome more and more super wealthy from the UK as no let-up is expected in the ongoing exodus of millionaires from Britain despite moves on some back pedalling in the Labour government’s highly controversial non-dom tax rules, experts said.
Experts also called for a complete reversal of the planned amendments to the non-dom tax rules for the UK to make it easier for wealthy people to move to the UK, especially in light of the Trump presidency.
Chancellor of the Exchequer Rachel Reeves last week indicated watering down some of the provisions in the country’s non-dom tax rules.
The changes in the works are related to rules governing the “temporary repatriation facility” – a transition window which will allow non-doms to bring overseas income into the UK and pay a reduced tax rate.
The arrangement was due to last for three years from April 2025, as announced in the October budget, but speaking at the World Economic Forum in Davos, Reeves said she would be making this more generous.
“It appears there is some back pedalling on the UK government’s attack on non-doms. However, the Labour Party’s proposed changes to the non-dom tax regime, even with Rachel Reeves’ apparent watering down, still risk driving high-net-worth individuals away from London,” Karim A. Youssef, a leading arbitration lawyer and dispute resolution expert, who lives between Cairo, Dubai and London, told Arabian Business.
“As an international arbitration lawyer living between Cairo and London, I’ve seen a sharp rise in clients abandoning London to more tax-friendly hubs like Dubai, Abu Dhabi, and Singapore,” he said, adding that “and where my clients go, their wealth will follow”.
“Non-dom” status, prior to the proposed amendments, allowed the world’s wealthy who preferred to live in the UK to avoid paying tax on money made abroad because their permanent home is considered outside of the country.
Labour’s manifesto, however, vowed to abolish the status to “address unfairness in the tax system” and raise funds for public services.
Non-dom rules criticised
Reeves’ announcement was welcomed by tax advisers, but said the UK government should go further.
Youssef said while the softening of these policies may aim to limit damage for those who were already looking for reasons to stay in the UK, it does not go far enough.
Removing the tax advantages of non-dom status and introducing the ‘Foreign Income and Gains Regime’ alongside higher capital gains taxes, significantly increases tax burdens for high-net-worth individuals (HNWIs), he said.
“This makes London far less attractive compared to rising hubs like the UAE and Singapore,” the leading arbitration lawyer, who advises the super wealthy mainly on tax matters, said.
“The UBS Global Wealth Report predicts a significant HNWI exodus [from the UK] – a trend I’m already seeing among my clients,” he said.
Experts said since London’s status as a leader in global finance relies on its ability to attract and retain HNWIs, watering down these changes will not be sufficient.
The policies must be reversed entirely, and without a decisive shift, Labour risks accelerating London’s decline as the destination of choice for business, investment, and high-stakes legal disputes, they said.
UK’s wealth exodus concern
Tax experts, however, said Reeves’ revelations on the far-reaching changes in the non-dom tax rules appeared to be a reflection of the concerns of the UK government on the rising trend of millionaires’ exodus from the country, and could offer more ‘softening’ measures.
They cited the Chancellor’s comments to the Wall Street Journal that “we have been listening to the concerns that have been raised by the non-dom community” as an indication of the growing concerns within the upper echelons of the government and the Labour Party on this front.
Reeves told the Wall Street Journal: “And in the finance bill, we will be tabling an amendment which makes more generous the temporary repatriation facility, which enables non-doms to bring money into the UK without paying significant taxes.”
The new extension comes after analysts found over 10,000 millionaires left the UK in 2024, a whopping 157 per cent spike from that in 2023.
The numbers also showed that the UK has lost more wealthy residents than any other country last year, except China.
According to studies by global analytics firm New World Health and investment migration advisers Henley & Partners, the UK became a net outflow country of millionaires after the Brexit vote in 2016, but the big haemorrhage happened last year.
A section of tax experts said Donald Trump’s presidency in the US is a chance for the UK government to attract some of the ‘exiting millionaires’ back, besides attracting more wealthy people, if the controversial tax amendments related to non-dom status are reversed.
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