A report by the International Inequalities Institute of the London School of Economics suggests that the vast majority of extremely wealthy people in the UK would never leave the country for tax reasons because of career risks, familial upheaval, attachment to the places they call home and the perceived stigma attached to tax migration. Some described tax havens as “boring” and “culturally barren.” London-based participants were eager to retain access to the city’s private health services and private schools as well as its cultural assets.

On the other hand, many consider the top UK tax rates to be too high and fear further increases. Some would pack their bags if tax rates rose to those seen in the 1970s – up to 83 per cent – or if a Corbyn style government took power.

The authors of the report posed the question: “why do stand in such stark contrast to the prevailing media narrative that ’the rich are fleeing Britain to escape taxes?’”

The answer perhaps lies in the choice of participants. First, there were only 35 of them. Secondly, they are predominantly UK people, most of whom live in London. Thirdly, the definition of the “super rich top 1 per cent” refers to those with over £5 million of household wealth or an annual income of £130,000 or more.

These are not the people who are leaving or threatening to leave the UK.

Those who are considering leaving are internationally mobile high net worth individuals, most of them “non-domiciled.” These are people whose home is elsewhere who have come to the UK for business or employment purposes, or as a lifestyle choice. Many are attracted by London’s financial and business infrastructure, cultural assets, schools and safety and stability. They have a net worth of £30 to £50 million upwards, often have homes and family connections in other countries, and have an international lifestyle.

Non-doms are eligible for a favourable tax regime which applies for the first 15 years of UK residence. Those who claim the “remittance basis” pay tax only on their UK income and gains and overseas income and gains which they bring to the UK. After 15 years they are “deemed domiciled” and have no tax advantages.

Non-doms remain taxable on their UK income and remittances of offshore income. According to HMRC’s statistical analysis, in the 2021-22 tax year those claiming to be domiciled or deemed domiciled paid £12.4 billion pounds in income tax and capital gains tax. Remittance basis users accounted for about two thirds of this figure. 

These are the people who are likely to leave if Labour win the next election and carry out their promise to “abolish non-dom status.” The devil will be in the detail, but there are many high net worth non-doms who will leave the UK if their worldwide income, including that in trusts, is exposed to high rates of UK tax. They do not “belong” to the UK, so leaving it is less of an emotional wrench, and their wealth gives them options.

If an individual follows the rules, they can be certain that they are no longer UK resident and so out of the UK tax net. And they can visit the UK for all those things that London has to offer – culture, sport, restaurants, events and so on. In some cases, they could regularly spend up to four months a year in the UK and yet be non-resident.

If a non-dom does decide to leave, it is not necessary to migrate to “boring” or “culturally barren” tax havens to pay less tax. The prospect of palm fringed tropical beaches may appeal to some, but many are business owners and entrepreneurs, for whom financial infrastructure and lifestyle are important. Nor do most non-doms object to paying taxes. They do object to constantly changing rules, instability in the tax regime and significantly rising rates. They are fortunate in having a choice as to where they want to live. 

As the Labour Party, is looking to abolish the non-dom tax regime, other countries are seeking to attract new immigrants with favourable tax regimes or have a low or no tax system anyway. Possibilities include Italy, Hong Kong, Singapore, Gibraltar, Bahrain, Dubai and Switzerland. Even the US is in the frame. The top tax rate is 37 per cent, but tax-free allowances and reliefs are much more generous than in the UK and a married couple escape estate tax on the first $24.84 million of wealth compared with the UK’s £500,000 to £1 million exemption from inheritance tax.

Having chosen your destination, you must get there. Some visas and residency permits are easier to acquire than others. Some countries prohibit “foreigners” from buying a home or impose conditions on a purchase, including Jersey, Canada, the UAE, Singapore, and Switzerland. 

If the UK tax landscape changes for the worse, many high net worth families will stay, but many will go. For those people, it is essential to get legal advice early, to plan the move and navigate the immigration, tax, and lifestyle hurdles of migrating to their new country.