Rachel Reeves mulls inheritance tax U-turn as non-doms flee
Rachel Reeves is reportedly mulling over changes to inheritance tax (IHT) on non-doms for assets held around the world, as pressure has ramped up from the City.
That’s according to a report in the Financial Times, with “tweaks” to current rules to stem the UK’s haemorrhaging of non-doms.
This potential U-turn follows pressure on the Chancellor to deliver a “clearer, more stable tax environment” for businesses and wealth creators.
As of April, global assets have been slapped with a 40 per cent inheritance tax, which the FT claims is the aspect of the rule changes that has caused the most trouble in the Square Mile.
Before Labour came to power, the party claimed that the crackdown on non-dom trusts would bring in £430m each year, although the Office for Budget Responsibility (OBR) estimates following the Budget found that the tax would bring in half as much.
The Treasury said: “The UK remains highly attractive. Our main capital gains tax rate is lower than any other G7 European country and our new residence-based regime is simpler and more attractive than the previous one, whilst it also addresses tax system unfairness so every long-term resident pays their taxes here.
“As the Chancellor set out at Spring Statement, the government will continue to work with stakeholders to ensure the new regime is internationally competitive and continues to focus on attracting the best talent and investment to the UK.”
Inheritance tax non-dom exodus
Rishi Sunak’s Conservative government first announced the rules ahead of the General Election, likely to preempt Labour plans to do the same.
The rules were confirmed by Rachel Reeves at her Budget in October and implemented in April.
High-profile figures are poised to leave the UK, such as Sunday Times Rich List steel billionaire Lakshmi Mittal.
Mittal bought what was then the world’s most expensive home for £67m in 2004, and his businesses are a major British employer.
According to research released earlier in June, four in ten non-doms are actively considering ditching the UK for somewhere with a more favourable tax regime.
Meanwhile, Morning Wire reported earlier in the month that the fiscal “black hole” left by the one in ten non-doms – at least 25,000 – who left the UK in 2024, amid a government tax crackdown.
The £34bn shortfall would easily wipe out the Chancellor’s razor-thin fiscal headroom, and could lead to tax rises.