May 15, 2025 • 19 mins
The UK government’s plan to scrap the “non-dom” tax status—a policy that allowed wealthy foreign residents to avoid taxes on overseas income—was designed to close a loophole and raise billions of pounds in tax revenue. However, according to a new study from the Centre for Economics and Business Research, it might end up costing the economy more than it brings in if just one in four of the 74,000 people affected chooses to leave the country.
In this week’s episode of In the City, hosts Allegra Stratton and Francine Lacqua sit down with Nimesh Shah, chief executive of Blick Rothenberg, to unpack what’s at stake.
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Speaker 1 (00:02):
Bloomberg Audio Studios, Podcasts, radio News. Welcome to in the City.
Each week we unpack a story that's crucial to the
world's financial capitals. I'm Allegri Stratton.
Speaker 2 (00:25):
And I'm Francis Laqua.
Speaker 1 (00:26):
This week we're going to dig into the impact of
the UK's decision to end the non dom residence status.
The goal was to close a tax loophole most used
by wealthy foreigners, but could the government's plan to generate
billions more in taxes annually actually backfire. Welcome to the City.
Speaker 3 (00:45):
Of London, The City of the City of London.
Speaker 2 (00:50):
Release mind the gap between.
Speaker 3 (00:52):
The financial heart of the country, the city the city.
Welcome to in the City, then clear of the doors.
Speaker 1 (01:08):
Pe so from. There's a new study out by the
Center for Economics and Business Research. Its main finding is
that the UK's tax overhaul for wealthy foreigners could cost
the economy more than it brings in. Can you believe it?
Speaker 2 (01:23):
Well, we've already heard of a lot of people actually
leaving because of the new rules, and the think tanks
argument is that if just one in four of those
affected choosers to leave the country, then the reforms to
the tax policy would actually flip from a net gain
for the Treasury to actually a.
Speaker 1 (01:38):
Cost yep and according to the Office for Budget Responsibility,
Britain's official fiscal watchdog, around twelve percent of the UK's
non doms would leave in response to the government's changes.
So obviously that's not yet up at that one in
four ratio, but nonetheless it's quite a large number, isn't it.
Speaker 2 (01:56):
Yeah, it's large. Now the Treasury is pushing back. It
says it doesn't not recognize the figures in this report.
But still report brings up some points that a lot
of people in the city have been discussing. So in
this episode we're going to talk about whether this is
a clever tax strategy that levels of playing field, or
isn't actually a risky move that could push away the
(02:16):
very people who fuel parts of the UK economy. So
to discuss all of this, we're joined by Nimeshah, chief
executive officer of Blick Rothenberg. Now, Nimesh works closely with
entrepreneurs across a wide range of industries. He advises them
on all aspects of their personal and corporate tax affairs,
whether they're just starting out, scaling up or planning an exit.
Speaker 1 (02:37):
So thanks for joining us, NIMESH. Can you just describe
from your vantage point what you are seeing right now
in wealthy individuals deciding how to handle this new regime.
Speaker 3 (02:49):
The climate on the non domin reforms has changed completely
over the last twelve months since the original Tory announcement.
There was an initial backlash from I know with individuals
about leaving the UK as the original announcements were handled
incredibly badly in terms of the shock announcement and the
lack of consultation, and then they worry that a future
(03:11):
labor government might make those rules even more difficult. Since then,
we've seen maybe a tempered down of people actually wanting
to leave the UK. That knee reaction has slowed down slightly,
but there is still a direction of wealthy individuals who
are at least planning on leaving the UK over the
(03:32):
medium term. It may not have been as extreme as
people leaving straight away on the fifth of April of
this taxi here, but certainly people are making plans on schooling, housing,
accommodation work, setting up their businesses abroad so that they
can exit the UK over a longer period of time.
So I think maybe some of the stories that we're
seeing in the press are slightly blown out proportion around
(03:55):
very high profile individuals that are making steps to leave
and maybe can feasibly leave more easier because they already
have established infrastructure abroad. I think the majority of high
net worth individual population is taking a much more measured
approach over the medium term to make plans to leave
the UK, so we'll see this gradual effect over a
period of time.
Speaker 1 (04:14):
The story we're looking at this week is this idea
that as soon as it gets to be one in
four of the UK's non doms leaving the UK, then
that is when the policy goes from bringing in money
to losing money. Do you think that's a threshold that
will ever be reached.
Speaker 3 (04:31):
I suppose It's difficult to say where the one in
four is actually come from. I imagine there is some
sort of science and maths behind those statistics. At the moment,
the government is banking on a number of non doms
still staying in the UK and actually using the temporary
Repatriation facility, which is a twelve or fifteen percent tax
(04:54):
charge to bring historic moneies into the UK. A lot
of the revenues actually coming from that, and if you
look at the Ober projections, it was about thirty billion
that the government were planning to raise over the lifetime
of this parliament. I don't think there will be necessarily
a tipping point in this parliament where we see one
in four or if it's one in five, whatever the
(05:14):
number may be, may lead where it starts costing the
government tax revenue, because I think the effects of this
is more gradual, giving the gradual pattern of people leaving,
and also that hit the Treasury expected to get from
the temporary repatriation facility as well.
Speaker 2 (05:29):
In the METS what kind of non doms are leaving,
So I think overall you have seventy four thousand non
doms in the UK. Now, under the previous system, non
dams can basically avoid UK taxes on their overseas earnings,
but would still pay taxes on domestic income, spending and
any funds brought to the UK. I mean the concern
if you're a wealthy businessman and we know there are
a lot of them that chose the UK to be
(05:51):
their home, but they have billions of dollars of billions
of sterliings of investments elsewhere, I mean, it doesn't make
it makes zero sense for them to stay in the
UK if they're going to be our attacked on those assets.
Speaker 3 (06:02):
Yeah, tax was a driver, a incentive for wealthy foreigners
to come into the UK, but it wasn't the only consideration.
In my experience of working with non arms over the
last twenty years, said to someone only today that London
is the center of the world. Really has the perfect
time zone. It has a solid sort of predictable climate
(06:23):
as well. Maybe not the sunshine that we'd expect all
the time, but the schooling is great, a long history,
The schooling's great, It's got a history, the tradition. London
has a lot of attraction as far as bars, restaurants, theaters,
activities have to go. So as a home, London still
has a lot of pull, not at least also the
(06:44):
safety considerations and the rule of law as well. I'd
say tax was maybe the carrot that hooked people in
to considering the UK in the first place, but there
are lots of other reasons why people would stay here
as well.
Speaker 2 (06:55):
But again, if I'm a billionaire and I have you know,
big businesses in India, if have big businesses in the
US and now have to pay taxes on those business
so frankly have nothing to do with the UK. Is
there any other country that's as punitive for non arms
as this new system is.
Speaker 3 (07:11):
Well, just to demystifyze some of that as well, if
you do have a business with substance operating a different country,
it's not necessarily immediate the profits of that business are
going to be taxed on you. Now in the New World,
there are and have been lots of statutory exemptions reliefs
within the UK tax law which does exempt overseas businesses
(07:33):
from being taxed in the UK provided they have operations
and substance in those areas. So in some cases, yes,
non doms will face additional taxes because of the new
regime because of the money that they have accumulated outside
of the UK and a generating income on that. But
there are other jurisdictions who follow very very similar pattern.
(07:53):
I mean, our closest sort of neighbor around this is
the US, where the US actually has more difficult rules
for overseas corporations that are operating outside of the US
and taxes then being levied on those profits for US
resident persons. But the thing that I suppose the UK
needs to be very mindful of which I think the
government has maybe underestimated, is a number of jurisdictions are
(08:16):
popped up which are offering very very attractive tax incentives
and holidays, and maybe the infrastructure isn't there, or maybe
the attractiveness of those locations isn't quite there yet, but
the tax is definitely turning a lot of heads for
people to consider those locations, and I think those will
become even stronger over the next few years as more
people start to live in those areas and the infrastructure
(08:40):
starts building up around them.
Speaker 1 (08:42):
Yeah, I mean before we get onto the rivals and
the sort of morsels that they're offering to attract people
to leave the UK. In terms of the British regime,
my understanding was that for a certain age of very
wealthy individuals, it was the inheritance tax policy in particular
that was felt to be really something that they couldn't stomach.
Speaker 3 (09:02):
Yeah. I think that from my perspective in speaking to
my peers in the profession, the inheritance tax was the
straw that broke the camel's back. I think there is
a real hatred for inheritantis. I mean it's widely reported
the inheritance tax is the most hated tax in the UK.
And for non doms, they've never had to really think
(09:23):
about inheritance tax. It's something that they would not have
been subject to under the Old World and through some
sensible planning that they would have done using offshore trusts.
They now face the reality of a cliff edge from
now this April where they are exposed to inheritsonce tax
forty percent on their worldwide assets. There is some limited grandfathering,
(09:44):
but it's not as generous as what the original Conservative
proposals were suggesting. And so that's the area where non
doms are most concerned. That they've said that actually, I'd
built up wealth, large amounts of it when i haven't
had anything to do the UK. I've spent a period
of time in the UK, and that full wealth now
(10:05):
is exposed to UK inheritance tax at forty percent. And
it's that forty percent that is the headline grabber here
where people feel that is a big number and that's
not something that they're prepared to stomach and there is
a real and fairness around being taxed on something that
had nothing to do with their UK or their time
in the UK. So that's the I suppose the push
factor here for lots of non doms. They're saying, well,
(10:27):
i need to get out of the UK system because
I'm not going to risk a forty percent hit on
something that I just firmly believe should never be assessed
to UK and Erison's tax in the first place.
Speaker 1 (10:38):
The government they were trying to do two things. They
were trying to do something political, so they were trying
to signal that, you know, to the Labor Party, to
the left of the Labor Party, that they were going
to be more egalitarian and redistribute wealth and all of that.
They're also trying to make money with a very very
straightened budget book. So they're the two things they were
trying to operate for. But equally, I suspect if you
(10:59):
can't of got them in a room and ask them truthfully,
you know, do they regret some of it or the
full extent of the departures we're watching. They might say
that they're a bit worried because what has become more
and more clear is that growth is what they need.
By the next election, they need to show that the
UK economy is growing and if you lose too many
(11:19):
wealthy people, absolutely take your point that it is not
yet at that kind of tipping point number that the
report suggests, but if you lose too many people, that
is trickier. Yeah.
Speaker 3 (11:30):
I think it would be remiss of the government and
the Rachel Reason's team to acknowledge that this isn't concerning
the stories and the plans that certainly individuals are making
over the next few years, and how that then impacts
the growth of gender. I think what we've also not
talked about is the number of foreigners wealthy individuals are
(11:51):
now not coming to the UK as well, which is
very difficult for anyone really to measure and capture. If
I suppose I've had my time, I suppose and go back.
I think the government did a poor job at executing this,
and that goes right back from the Conservative government when
they announced the proposals as a phata con plea. There's
no consultation period. They didn't engage with the professional community
(12:14):
like myself on the design of these proposals. They were done,
and the lip service I suppose the profession received afterwards
also left a sour taste. And then I think Labour
coming out and saying we're going to make these wolves
worse again, that sent a lot of uncertainty into the
international community around this. I think there is still an
opportunity for the government, which not any government will probably
(12:37):
ever do, but to hold their hands up and say
we got this wrong, but we've got this wrong as well,
not only on non doms. We've got it wrong on
inheritance taxes, the farmers, the family businesses, the pension funds.
There's a number of areas of change that the government
have made on taxes as a package which has signposted
and pushed non doms out of the UK. I think
they could come back to the table and engage with
(12:59):
certainly the non community and say we think we got
this wrong. We can change this, and we can come
up with a new system or an enhancement of currently
of what we have, which could be a longer period
than the four years that we've got right now to
ten years to mirror kind of what some of the
competitor jurisdictions are doing. And also we want to be
able to find a way in which we can cushion
(13:21):
some of the inheritance tax friction that we're seeing, which
coupled with a fee that's been talked about a lot
and some lobbying groups have proposed a tiered tax system
where you would pay an annual fee based on the
level of wealth that you have, which would protect you
then from not only your income engagement, more importantly the
inheritance tax regime, and also then balance the books by
(13:43):
saying to the public that actually we need wealthy investment
into the UK. The UK is an island and has
been built on immigration investment here for a long time.
Here's a means to be able to get more revenue
from this population, balance the books, more money going into
the public services which were desperately but also it supplements
our growth agenda with more private investment into our businesses
(14:05):
and infrastructure.
Speaker 2 (14:06):
No match. How many millionaires do you think the UK
has lasted so far? So there were reports to saying
that it was about eleven twenty twenty four. And if
there is a change in tax regime inheritance taxation, do
they come back? I mean it's very difficult to kind
of pack up your family and come back to the UK.
So is there long term damage done no matter what
happens in the next couple of quarters.
Speaker 3 (14:28):
Yeah, I think it's important to say there is probably
a bit of sensitivity in that eleven thousand number that
is based on a projection, an estimate. It's probably the
only bit of research that probably exists out there is
the reality eleven thousand. I don't think anyone's captured that
data yet. Hopefully we'll see some official Treasury data come
out over the next few years. But what I am
(14:48):
seeing is two schools have thought here really from non doms,
which is one those that are prepared to ride it
out for the next four or five years during the
lifetime of this government because they feel that this government
won't last a second term, and say, actually, I'm prepared
to take the tax exposure in that period of time.
Maybe they're in a fortunate position where they're not quite
at the ten year juncture, so they're not fully exposed
(15:10):
to inheritance tax yere, so they've got a bit more
time in the hands. The other camp, we're saying, actually,
I'm gone, I need to get out of the system
before inheritance tax does come to bite me. But I'm
keeping a very watching eye on what will happen around
potential changes if we do have, say, a reform government.
Speaker 1 (15:27):
I'm going to say it might not necessarily get better
for them.
Speaker 3 (15:32):
Well, it may not because of a slightly different political
agenda if it is a reform government in the future,
but depending on where the direction goes politically. And I
think that's really important that some are saying, well, this
is a short term move for me out of the UK,
because I actually want to go and live in London.
I want to live in the UK for all the
reasons that we've talked about, and so in the world
(15:55):
where it is a bit more feasible to be more
transient and be more mobile and work abroad. It's inconvenient
where you've got young families and maybe certain business operations here.
But I think people are prepared to take a five
year view and then in the hope that in five
years time it will change. But I suppose the warning
shot there is that's an optimistic view. It's very difficult
(16:15):
for any government, new or old to then say, well,
there's a tax revenue that's coming in. How do I
square the circle by potentially a giveaway both politically and
financially in order to make this work. And so the
government it's like a drug. I suppose when you raise taxes,
it's very difficult to get off that drug. And I
think that's the difficulty that we'll find in the future.
(16:36):
So for some people, as I say, are in holding
pattern and hopeful that things will improve over the next
five years.
Speaker 1 (16:43):
I wonder whether for a lot of these countries, including Italy,
which has got a very beneficial regime for them, but
even so, you know, they have the same constraints on
an aging population, needing more money, needing more taxation. Clearly
they've made a decision that they want to entice the
billionaires and millionaires rather than you know, tax them at
the level that we are. But nonetheless, lots of nations
(17:05):
are facing the same pressures, demographic pressures and fiscal pressures,
which is why they're starting to look at non doms.
And I suppose if you're a non doom you're thinking, well, actually,
my room for maneuver over the next few years is reducing.
Speaker 3 (17:19):
Yeah, places like Italy clearly have made a strategic decision
that this is where they're going to place their chips
by creating this very attractive tax and immigration regime to
go and entice wealthy foreigners into Italy. Now, what I
suppose I'm encouraged by when I look at governments like
Italy is that they've made a strategic decision. It doesn't
(17:40):
feel like there is a strategy with our government at
the moment around what they actually want to do. It's
based on lots of reaction and ideology unfortunately at this stage.
So I'm unclear as someone who's been working in tax
for the last twenty years as to what this government
is trying to achieve over a long term period and
how they're going to get there. There doesn't seem to
(18:01):
really be a plan. What I would say like to
see from the government is to come out and put
their flag in the ground and say, strategically, this is
what we're aiming for, and these are the policies, whether
they're uncomfortable politically or not, but this is how we
go and achieve those plans. Difficult decisions do need to
be made, which may not make you a popular government,
(18:22):
especially with your core demographic of voters who perceive non
doms and the wealthy in some way to be a
root cause of some of the problems that the country's facing.
But we have seen other countries have made it work.
Italy now for the best part of ten years, this
regime has survived. It's changed slightly. They've doubled the fee,
possibly in reaction to the fact that there's more demand
(18:44):
of people who wanting to come there. But I think
we have lost our way on understanding actually the behavioral
response of non doms, where it's a much easier now
to go and find a new home very quickly because
there are other countries that are looking to buy in
that wealth and the benefits of that wealth that can
be generated locally.
Speaker 2 (19:05):
Nimesh, thank you so much for joining us.
Speaker 3 (19:07):
Thank you.
Speaker 1 (19:13):
Thanks for listening to this episode of In the City
from Bloomberg. This episode was hosted by me Alecra Stratton
and Francine Laqua. It was produced by Someasadi Moses and
Am and Tala Armadi. Brendan Francis Newnham is our executive
producer and special thanks to Nimesh Shah. Please subscribe, rate,
and review wherever you listen to podcasts.
Bloomberg Audio Studios, Podcasts, radio News. Welcome to in the City.
Each week we unpack a story that's crucial to the
world's financial capitals. I'm Allegri Stratton.
Speaker 2 (00:25):
And I'm Francis Laqua.
Speaker 1 (00:26):
This week we're going to dig into the impact of
the UK's decision to end the non dom residence status.
The goal was to close a tax loophole most used
by wealthy foreigners, but could the government's plan to generate
billions more in taxes annually actually backfire. Welcome to the City.
Speaker 3 (00:45):
Of London, The City of the City of London.
Speaker 2 (00:50):
Release mind the gap between.
Speaker 3 (00:52):
The financial heart of the country, the city the city.
Welcome to in the City, then clear of the doors.
Speaker 1 (01:08):
Pe so from. There's a new study out by the
Center for Economics and Business Research. Its main finding is
that the UK's tax overhaul for wealthy foreigners could cost
the economy more than it brings in. Can you believe it?
Speaker 2 (01:23):
Well, we've already heard of a lot of people actually
leaving because of the new rules, and the think tanks
argument is that if just one in four of those
affected choosers to leave the country, then the reforms to
the tax policy would actually flip from a net gain
for the Treasury to actually a.
Speaker 1 (01:38):
Cost yep and according to the Office for Budget Responsibility,
Britain's official fiscal watchdog, around twelve percent of the UK's
non doms would leave in response to the government's changes.
So obviously that's not yet up at that one in
four ratio, but nonetheless it's quite a large number, isn't it.
Speaker 2 (01:56):
Yeah, it's large. Now the Treasury is pushing back. It
says it doesn't not recognize the figures in this report.
But still report brings up some points that a lot
of people in the city have been discussing. So in
this episode we're going to talk about whether this is
a clever tax strategy that levels of playing field, or
isn't actually a risky move that could push away the
(02:16):
very people who fuel parts of the UK economy. So
to discuss all of this, we're joined by Nimeshah, chief
executive officer of Blick Rothenberg. Now, Nimesh works closely with
entrepreneurs across a wide range of industries. He advises them
on all aspects of their personal and corporate tax affairs,
whether they're just starting out, scaling up or planning an exit.
Speaker 1 (02:37):
So thanks for joining us, NIMESH. Can you just describe
from your vantage point what you are seeing right now
in wealthy individuals deciding how to handle this new regime.
Speaker 3 (02:49):
The climate on the non domin reforms has changed completely
over the last twelve months since the original Tory announcement.
There was an initial backlash from I know with individuals
about leaving the UK as the original announcements were handled
incredibly badly in terms of the shock announcement and the
lack of consultation, and then they worry that a future
(03:11):
labor government might make those rules even more difficult. Since then,
we've seen maybe a tempered down of people actually wanting
to leave the UK. That knee reaction has slowed down slightly,
but there is still a direction of wealthy individuals who
are at least planning on leaving the UK over the
(03:32):
medium term. It may not have been as extreme as
people leaving straight away on the fifth of April of
this taxi here, but certainly people are making plans on schooling, housing,
accommodation work, setting up their businesses abroad so that they
can exit the UK over a longer period of time.
So I think maybe some of the stories that we're
seeing in the press are slightly blown out proportion around
(03:55):
very high profile individuals that are making steps to leave
and maybe can feasibly leave more easier because they already
have established infrastructure abroad. I think the majority of high
net worth individual population is taking a much more measured
approach over the medium term to make plans to leave
the UK, so we'll see this gradual effect over a
period of time.
Speaker 1 (04:14):
The story we're looking at this week is this idea
that as soon as it gets to be one in
four of the UK's non doms leaving the UK, then
that is when the policy goes from bringing in money
to losing money. Do you think that's a threshold that
will ever be reached.
Speaker 3 (04:31):
I suppose It's difficult to say where the one in
four is actually come from. I imagine there is some
sort of science and maths behind those statistics. At the moment,
the government is banking on a number of non doms
still staying in the UK and actually using the temporary
Repatriation facility, which is a twelve or fifteen percent tax
(04:54):
charge to bring historic moneies into the UK. A lot
of the revenues actually coming from that, and if you
look at the Ober projections, it was about thirty billion
that the government were planning to raise over the lifetime
of this parliament. I don't think there will be necessarily
a tipping point in this parliament where we see one
in four or if it's one in five, whatever the
(05:14):
number may be, may lead where it starts costing the
government tax revenue, because I think the effects of this
is more gradual, giving the gradual pattern of people leaving,
and also that hit the Treasury expected to get from
the temporary repatriation facility as well.
Speaker 2 (05:29):
In the METS what kind of non doms are leaving,
So I think overall you have seventy four thousand non
doms in the UK. Now, under the previous system, non
dams can basically avoid UK taxes on their overseas earnings,
but would still pay taxes on domestic income, spending and
any funds brought to the UK. I mean the concern
if you're a wealthy businessman and we know there are
a lot of them that chose the UK to be
(05:51):
their home, but they have billions of dollars of billions
of sterliings of investments elsewhere, I mean, it doesn't make
it makes zero sense for them to stay in the
UK if they're going to be our attacked on those assets.
Speaker 3 (06:02):
Yeah, tax was a driver, a incentive for wealthy foreigners
to come into the UK, but it wasn't the only consideration.
In my experience of working with non arms over the
last twenty years, said to someone only today that London
is the center of the world. Really has the perfect
time zone. It has a solid sort of predictable climate
(06:23):
as well. Maybe not the sunshine that we'd expect all
the time, but the schooling is great, a long history,
The schooling's great, It's got a history, the tradition. London
has a lot of attraction as far as bars, restaurants, theaters,
activities have to go. So as a home, London still
has a lot of pull, not at least also the
(06:44):
safety considerations and the rule of law as well. I'd
say tax was maybe the carrot that hooked people in
to considering the UK in the first place, but there
are lots of other reasons why people would stay here
as well.
Speaker 2 (06:55):
But again, if I'm a billionaire and I have you know,
big businesses in India, if have big businesses in the
US and now have to pay taxes on those business
so frankly have nothing to do with the UK. Is
there any other country that's as punitive for non arms
as this new system is.
Speaker 3 (07:11):
Well, just to demystifyze some of that as well, if
you do have a business with substance operating a different country,
it's not necessarily immediate the profits of that business are
going to be taxed on you. Now in the New World,
there are and have been lots of statutory exemptions reliefs
within the UK tax law which does exempt overseas businesses
(07:33):
from being taxed in the UK provided they have operations
and substance in those areas. So in some cases, yes,
non doms will face additional taxes because of the new
regime because of the money that they have accumulated outside
of the UK and a generating income on that. But
there are other jurisdictions who follow very very similar pattern.
(07:53):
I mean, our closest sort of neighbor around this is
the US, where the US actually has more difficult rules
for overseas corporations that are operating outside of the US
and taxes then being levied on those profits for US
resident persons. But the thing that I suppose the UK
needs to be very mindful of which I think the
government has maybe underestimated, is a number of jurisdictions are
(08:16):
popped up which are offering very very attractive tax incentives
and holidays, and maybe the infrastructure isn't there, or maybe
the attractiveness of those locations isn't quite there yet, but
the tax is definitely turning a lot of heads for
people to consider those locations, and I think those will
become even stronger over the next few years as more
people start to live in those areas and the infrastructure
(08:40):
starts building up around them.
Speaker 1 (08:42):
Yeah, I mean before we get onto the rivals and
the sort of morsels that they're offering to attract people
to leave the UK. In terms of the British regime,
my understanding was that for a certain age of very
wealthy individuals, it was the inheritance tax policy in particular
that was felt to be really something that they couldn't stomach.
Speaker 3 (09:02):
Yeah. I think that from my perspective in speaking to
my peers in the profession, the inheritance tax was the
straw that broke the camel's back. I think there is
a real hatred for inheritantis. I mean it's widely reported
the inheritance tax is the most hated tax in the UK.
And for non doms, they've never had to really think
(09:23):
about inheritance tax. It's something that they would not have
been subject to under the Old World and through some
sensible planning that they would have done using offshore trusts.
They now face the reality of a cliff edge from
now this April where they are exposed to inheritsonce tax
forty percent on their worldwide assets. There is some limited grandfathering,
(09:44):
but it's not as generous as what the original Conservative
proposals were suggesting. And so that's the area where non
doms are most concerned. That they've said that actually, I'd
built up wealth, large amounts of it when i haven't
had anything to do the UK. I've spent a period
of time in the UK, and that full wealth now
(10:05):
is exposed to UK inheritance tax at forty percent. And
it's that forty percent that is the headline grabber here
where people feel that is a big number and that's
not something that they're prepared to stomach and there is
a real and fairness around being taxed on something that
had nothing to do with their UK or their time
in the UK. So that's the I suppose the push
factor here for lots of non doms. They're saying, well,
(10:27):
i need to get out of the UK system because
I'm not going to risk a forty percent hit on
something that I just firmly believe should never be assessed
to UK and Erison's tax in the first place.
Speaker 1 (10:38):
The government they were trying to do two things. They
were trying to do something political, so they were trying
to signal that, you know, to the Labor Party, to
the left of the Labor Party, that they were going
to be more egalitarian and redistribute wealth and all of that.
They're also trying to make money with a very very
straightened budget book. So they're the two things they were
trying to operate for. But equally, I suspect if you
(10:59):
can't of got them in a room and ask them truthfully,
you know, do they regret some of it or the
full extent of the departures we're watching. They might say
that they're a bit worried because what has become more
and more clear is that growth is what they need.
By the next election, they need to show that the
UK economy is growing and if you lose too many
(11:19):
wealthy people, absolutely take your point that it is not
yet at that kind of tipping point number that the
report suggests, but if you lose too many people, that
is trickier. Yeah.
Speaker 3 (11:30):
I think it would be remiss of the government and
the Rachel Reason's team to acknowledge that this isn't concerning
the stories and the plans that certainly individuals are making
over the next few years, and how that then impacts
the growth of gender. I think what we've also not
talked about is the number of foreigners wealthy individuals are
(11:51):
now not coming to the UK as well, which is
very difficult for anyone really to measure and capture. If
I suppose I've had my time, I suppose and go back.
I think the government did a poor job at executing this,
and that goes right back from the Conservative government when
they announced the proposals as a phata con plea. There's
no consultation period. They didn't engage with the professional community
(12:14):
like myself on the design of these proposals. They were done,
and the lip service I suppose the profession received afterwards
also left a sour taste. And then I think Labour
coming out and saying we're going to make these wolves
worse again, that sent a lot of uncertainty into the
international community around this. I think there is still an
opportunity for the government, which not any government will probably
(12:37):
ever do, but to hold their hands up and say
we got this wrong, but we've got this wrong as well,
not only on non doms. We've got it wrong on
inheritance taxes, the farmers, the family businesses, the pension funds.
There's a number of areas of change that the government
have made on taxes as a package which has signposted
and pushed non doms out of the UK. I think
they could come back to the table and engage with
(12:59):
certainly the non community and say we think we got
this wrong. We can change this, and we can come
up with a new system or an enhancement of currently
of what we have, which could be a longer period
than the four years that we've got right now to
ten years to mirror kind of what some of the
competitor jurisdictions are doing. And also we want to be
able to find a way in which we can cushion
(13:21):
some of the inheritance tax friction that we're seeing, which
coupled with a fee that's been talked about a lot
and some lobbying groups have proposed a tiered tax system
where you would pay an annual fee based on the
level of wealth that you have, which would protect you
then from not only your income engagement, more importantly the
inheritance tax regime, and also then balance the books by
(13:43):
saying to the public that actually we need wealthy investment
into the UK. The UK is an island and has
been built on immigration investment here for a long time.
Here's a means to be able to get more revenue
from this population, balance the books, more money going into
the public services which were desperately but also it supplements
our growth agenda with more private investment into our businesses
(14:05):
and infrastructure.
Speaker 2 (14:06):
No match. How many millionaires do you think the UK
has lasted so far? So there were reports to saying
that it was about eleven twenty twenty four. And if
there is a change in tax regime inheritance taxation, do
they come back? I mean it's very difficult to kind
of pack up your family and come back to the UK.
So is there long term damage done no matter what
happens in the next couple of quarters.
Speaker 3 (14:28):
Yeah, I think it's important to say there is probably
a bit of sensitivity in that eleven thousand number that
is based on a projection, an estimate. It's probably the
only bit of research that probably exists out there is
the reality eleven thousand. I don't think anyone's captured that
data yet. Hopefully we'll see some official Treasury data come
out over the next few years. But what I am
(14:48):
seeing is two schools have thought here really from non doms,
which is one those that are prepared to ride it
out for the next four or five years during the
lifetime of this government because they feel that this government
won't last a second term, and say, actually, I'm prepared
to take the tax exposure in that period of time.
Maybe they're in a fortunate position where they're not quite
at the ten year juncture, so they're not fully exposed
(15:10):
to inheritance tax yere, so they've got a bit more
time in the hands. The other camp, we're saying, actually,
I'm gone, I need to get out of the system
before inheritance tax does come to bite me. But I'm
keeping a very watching eye on what will happen around
potential changes if we do have, say, a reform government.
Speaker 1 (15:27):
I'm going to say it might not necessarily get better
for them.
Speaker 3 (15:32):
Well, it may not because of a slightly different political
agenda if it is a reform government in the future,
but depending on where the direction goes politically. And I
think that's really important that some are saying, well, this
is a short term move for me out of the UK,
because I actually want to go and live in London.
I want to live in the UK for all the
reasons that we've talked about, and so in the world
(15:55):
where it is a bit more feasible to be more
transient and be more mobile and work abroad. It's inconvenient
where you've got young families and maybe certain business operations here.
But I think people are prepared to take a five
year view and then in the hope that in five
years time it will change. But I suppose the warning
shot there is that's an optimistic view. It's very difficult
(16:15):
for any government, new or old to then say, well,
there's a tax revenue that's coming in. How do I
square the circle by potentially a giveaway both politically and
financially in order to make this work. And so the
government it's like a drug. I suppose when you raise taxes,
it's very difficult to get off that drug. And I
think that's the difficulty that we'll find in the future.
(16:36):
So for some people, as I say, are in holding
pattern and hopeful that things will improve over the next
five years.
Speaker 1 (16:43):
I wonder whether for a lot of these countries, including Italy,
which has got a very beneficial regime for them, but
even so, you know, they have the same constraints on
an aging population, needing more money, needing more taxation. Clearly
they've made a decision that they want to entice the
billionaires and millionaires rather than you know, tax them at
the level that we are. But nonetheless, lots of nations
(17:05):
are facing the same pressures, demographic pressures and fiscal pressures,
which is why they're starting to look at non doms.
And I suppose if you're a non doom you're thinking, well, actually,
my room for maneuver over the next few years is reducing.
Speaker 3 (17:19):
Yeah, places like Italy clearly have made a strategic decision
that this is where they're going to place their chips
by creating this very attractive tax and immigration regime to
go and entice wealthy foreigners into Italy. Now, what I
suppose I'm encouraged by when I look at governments like
Italy is that they've made a strategic decision. It doesn't
(17:40):
feel like there is a strategy with our government at
the moment around what they actually want to do. It's
based on lots of reaction and ideology unfortunately at this stage.
So I'm unclear as someone who's been working in tax
for the last twenty years as to what this government
is trying to achieve over a long term period and
how they're going to get there. There doesn't seem to
(18:01):
really be a plan. What I would say like to
see from the government is to come out and put
their flag in the ground and say, strategically, this is
what we're aiming for, and these are the policies, whether
they're uncomfortable politically or not, but this is how we
go and achieve those plans. Difficult decisions do need to
be made, which may not make you a popular government,
(18:22):
especially with your core demographic of voters who perceive non
doms and the wealthy in some way to be a
root cause of some of the problems that the country's facing.
But we have seen other countries have made it work.
Italy now for the best part of ten years, this
regime has survived. It's changed slightly. They've doubled the fee,
possibly in reaction to the fact that there's more demand
(18:44):
of people who wanting to come there. But I think
we have lost our way on understanding actually the behavioral
response of non doms, where it's a much easier now
to go and find a new home very quickly because
there are other countries that are looking to buy in
that wealth and the benefits of that wealth that can
be generated locally.
Speaker 2 (19:05):
Nimesh, thank you so much for joining us.
Speaker 3 (19:07):
Thank you.
Speaker 1 (19:13):
Thanks for listening to this episode of In the City
from Bloomberg. This episode was hosted by me Alecra Stratton
and Francine Laqua. It was produced by Someasadi Moses and
Am and Tala Armadi. Brendan Francis Newnham is our executive
producer and special thanks to Nimesh Shah. Please subscribe, rate,
and review wherever you listen to podcasts.
Host
Francine Lacqua
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