Non-dom exodus could blow ‘black hole’ in public finances
At least 10 per cent of the UK’s non-doms left the UK last year following Rachel Reeves’ crackdown on the tax status, new research claims, a rate which if continued into this year would wipe out the Chancellor’s fiscal headroom.
According to the Chamberlain Walker study, conducted by former Treasury economist Chris Walker, a minimum of 25,000 non-doms or former non-doms quit Britain in 2024.
The finding, which used a combination of HMRC, peer reviewed and Henley & Partners data, will likely mean the Chancellor faces a multibillion-pound black hole in the public finances, the report said, something likely to renew fears that additional tax rises will be needed to make up for the lost revenue.
Citing a recent CEBR study, which found that if 25 per cent of non-doms quite the UK the government would lose all the additional revenue from the original reform, Walker wrote: “This would create a £34bn black hole in the public finances, which given limited fiscal headroom, would require tax rises on ordinary people and businesses or cuts to vital public services.”
Walker’s report, which does not include any departures in the months leading up to the change coming into force in April, will compound fears that the government’s decision to abolish the UK’s 200-year-old non-dom regime has triggered a mass exodus of super-rich foreigners from Britain.
There have been several confirmed reports high-profile wealthy foreigners trading the UK in for low-tax jurisdictions since the Chancellor confirmed the status would be scrapped in October. The change announced by Reeves in her maiden Budget went further than a similar move announced by the previous Conservative administration, making non-doms’ overseas assets and foreign-held trusts liable for inheritance tax (IHT) in the UK.
Walker’s paper argued that while the old non-dom regime was “unfair and unsustainable”, exposing non-doms’ assets to inheritance tax suggests that “the pendulum has now swung too far in the other direction.
“The emerging evidence around actual non-dom flight suggests that policy amendments are urgently needed,” the paper said.
Walker, who spent over a decade working as a civil service economist before establishing his economics consultancy in 2016, proposed removing the cohort’s exposure to IHT, arguing it would help the government find a “revenue maximising position”. The IHT receipts make up only 1.5 per cent of the overall receipts, according Office for Budget Responsibility estimates, and yet previous studies have indicated it is driving out a disproportionately high number of wealthy non-doms
The Treasury was contacted for comment. It has previously argued that the UK remains highly attractive to foreign investment, and that the scheme it put in place is simpler and more attractive than the old non-dom regime.