Up to 40% of Non-Doms May Leave UK, Warns Tax Lawyer

The UK’s tax overhaul for wealthy foreigners could end up costing more than it raises if just a quarter of those affected decide to leave, according to the Centre for Economics and Business Research.

The think tank warned that abolishing non-domiciled resident status—scrapped last month—risks turning into a fiscal burden rather than a revenue boost for the Treasury.

Charlie Sosna, Partner and Head of Private Wealth and Tax at Mishcon de Reya, said the firm is already working with clients preparing to leave. He told Bloomberg Radio’s Caroline Hepker and Tom Mackenzie that he “wouldn’t be surprised” if as many as 40% of the UK’s non-doms end up relocating.

The Office for Budget Responsibility, Britain’s fiscal watchdog, has estimated that closing the loophole could generate billions more in taxes annually, while cautioning that forecasts are “very uncertain” for this wealthy and internationally-mobile cohort. The OBR has also estimated that 12% of the UK’s 74,000 non-doms would leave in response to the changes.

On Tuesday, the CEBR highlighted the potential cost if these numbers prove wrong. The think tank estimated the reforms would flip from a net gain for the Treasury to a cost if at least 25% of Britain’s non-doms exit, and would cost the public finances around £700 million per year if a third were to leave. The CEBR’s report was produced for the Land of Opportunity campaign, which is linked to the right-wing think tank Onward and is lobbying for the UK to adopt friendlier policies toward entrepreneurs.

“Ultimately, the policy is being made and supported by figures that are inherently uncertain,” Sam Miley, CEBR managing economist and author of the report, told Bloomberg Radio in an interview. “There is a significant risk to fiscal matters based off what is an entirely uncertain variable.”

A spokesperson for the Treasury said it did “not recognise” the figures in the CEBR report, noting that “the independent OBR has confirmed that the changes to the regime will raise £33.8 billion over the next five years.”

Some of Britain’s richest investors have already signaled their departure, including Goldman Sachs Group Inc.’s Richard Gnodde and real estate magnates Ian and Richard Livingstone, since the rule change was confirmed last year.

A separate survey published by Oxford Economics for the Foreign Investors for Britain campaign estimated that the non-dom population could be reduced by as much as 32% by the end of the decade — while also cautioning that the consequences are hard to predict.

“It’s safe to say it’s an increasing percentage every day and year that goes by,” Charlie Sosna, global head of private wealth and tax at law firm Mishcon de Reya, said on Bloomberg Radio on Tuesday. “I absolutely wouldn’t be surprised if it’s 25% plus, heading into the 40% mark.”

Under the previous system, non-doms could avoid UK taxes on their overseas earnings but would still pay taxes on domestic income, spending and any funds brought to the UK. Collectively, non-doms paid £8.9 billion in income tax, capital gains tax and nationall insurance in the 2023 financial year, according to the government.

Both the previous Conservative and current Labour administrations backed ending the non-dom regime, replacing it with a residency-based system and a four-year tax break on overseas earnings. Keir Starmer’s government has also said it will impose inheritance tax on foreign assets for non-doms who have been UK residents for more than 10 years.

“Replacing the outdated non-dom tax regime with a new internationally competitive residence-based system addresses unfairness in our tax system, attracts the best talent and investment to the UK, and ensures everyone who is a long-term resident in the UK pays their taxes here,” the Treasury spokesperson said.

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