Non-dom directors beware – leaving the UK comes with trade-offs
Running for the exit after Labour’s non-dom tax crackdown? Employment lawyer Chiara Muston outlines the trade-offs to consider
Recent analysis has revealed there has been a significant increase in the number of UK directors leaving the country to take residence abroad, while maintaining at least one directorship in UK businesses.
Between October 2024 and July 2025, no fewer than 3,790 directors (40 per cent more than in the same period last year) reportedly left the UK. Although this figure is swollen by a large number of individuals returning to their home country (mainly Germany and China), the analysis found that many UK nationals chose to depart too, with the UAE, Spain and the US their preferred destinations.
The main reasons cited for the surge has seemed to be the current government’s decision to abolish the non-dom tax regime, increase capital gains tax and national insurance and reduce inheritance tax relief.
The decision to structure business activities in tax-efficient jurisdictions to reduce tax on dividends and capital gains is a legitimate one, but before rushing to leave the UK, directors and businesses should be careful of the unexpected and unwelcome trade-offs that may arise in low-tax countries, especially when it comes to employment law.
Your employment rights could change
One of the first aspects to consider is that local legislation may include imperative or mandatory rules which could override whatever arrangements exist between the senior executive and their employer (including the election of the governing law of the employment contract). These rules may impact significantly on aspects such as the status of the director or the validity and enforceability of existing business protections.
In some European jurisdictions holding a directorship is considered incompatible with employment status. The knock-on effect of this incompatibility could be that the director loses employment status and can no longer enjoy certain entitlements (for example, paid holidays) or statutory protections (such as unfair dismissal protection) which are typically recognised only to employees.
As far as businesses are concerned, mandatory provisions applying in the new jurisdictions may affect the enforceability of the post-termination restrictions in the senior executive’s contract, and companies may suddenly find that the carefully crafted covenants they were planning to rely on following the end of the employment no longer have teeth.
If relationships turn sour…
There may also be situations where disputes arise, or employment relationships turn sour. A senior executive may feel the need to protect their position in an employment tribunal and it may be that, despite any contractual provisions dealing with this, governing rules and jurisdiction are those of the country in which the senior executive elected to move their residence.
In the overseas jurisdiction the director’s ability to pursue certain claims may be severely curtailed and the protection that can be sought may be much leaner. Enforcement mechanisms aren’t always as mature or certain as they are in the UK.
A good example of this is the Dubai International Financial Centre (DIFC), an independent, financial free zone located within Dubai, UAE (the top destination and preferred haven for UK nationals departing from the UK).
The DIFC’s employment legislation is not as robust as in the UK, despite being influenced and directly adapted from the laws of England and Wales: anti-discrimination laws do not recognise protection against discrimination based on sexual orientation or on gender reassignment; the statutory concept of unfair dismissal is non-existent; costs will generally follow the event with the loser expected to meet the successful party’s costs (or at least most of them).
A director who has been discriminated against for their sexual orientation or has been unfairly dismissed might find it difficult to obtain remedy.
Pause before you pack that bag
In international moves, and for any director thinking of leaving the UK, strategic legal planning is key and should not be overlooked. Businesses should seek employment counsel advice so there is a clear understanding of the mandatory/imperative provisions and should make sure their contracts, policies and governance structure are fit for the overseas jurisdiction.
Senior executives who are thinking of moving abroad should not just focus on the tax advantages but look at the broader picture and think long-term before packing their suitcase and making the leap.
Chiara Muston is a senior associate in the employment team of international law firm Charles Russell Speechlys