Britain's Millionaire Exodus: Labour's Tax Plans Are Pushing The Rich Out To Greece, Italy And Ireland

A top UK tax and immigration advisor, David Lesperance, helps high-net-worth individuals manage their money. However, the looming Labour tax hikes resulted in eight of his super-wealthy clients approaching him for help leaving the UK. Lesperance reportedly said the potential increases to capital gains, inheritance tax rates, and a new "exit levy" for wealthy people leaving Britain are causing concerns for the country's leading taxpayers.

Lesperance's outlook comes after estimates emerged recently that the nation could lose one-fifth of its millionaires under the Labour government. An exodus of such scale raises risks of substantial budgetary shortfalls, given that the country receives a large chunk of its tax revenue from a handful of wealthy people. Lesperance's clients, who he is helping to leave the UK, are some of the top taxpayers in the nation.

Leaving For Ireland, Greece, and Italy

Lesperence highlighted that four of his eight clients are domiciled in the UK, and the rest aren't. The domiciliaries are worried about a potential exit tax and the outcomes of the upcoming Budgets. For now, five of his clients are leaving for Ireland, two to Italy, and one to Greece. Concerns grow as Labour could push through Conservative plans to eradicate non-domicile status, a two-century-old rule that lets people with permanent homes abroad bypass UK taxes on overseas income for up to 15 years.

However, non-domiciles still have to pay taxes on investment profits and any income made on UK soil. Lesperance explained his clients are looking for a new residence as a form of "fire insurance," which could be implemented if Labour's policies became more aggressive towards the rich. "We won't know what happens in the Budget until October 30, so a lot of clients are preparing for the worst and hoping for the best," he said.

UK Should Avoid Scaring Away Its Golden Geese

Economists at the Centre for the Analysis of Taxation recently floored the "exit" tax concept for wealthy individuals leaving the UK. The idea is to discourage them from leaving the country. Lesperance believes the "exit levy" could be a one-off capital gains tax charge on UK profits, and the developments have boosted demand for his services. The "exit levy" plan is gaining momentum as the UK remains among the few countries that don't charge the wealthy leaving the country while ministers view the rule as a way to raise more funds. He also believes the UK is "extraordinarily dependent" on a few wealthy people who pay a large portion of tax revenues and warned against scaring off these "golden geese."

The latest data show that 60 of the UK's wealthiest cumulatively pay £3 billion annually in income tax, almost two-thirds of the additional spending Labour pledged in its manifesto. According to information secured by BBC from the HMRC, each of the 60 individuals had earned a minimum of £50 million in the financial year 2021-22. Furthermore, Pimlico Plumbers founder Charlie Mullins, with a fortune of £145 million, is among several prominent figures who have decided to leave the UK to avoid potential tax charges.

Economists Worry Ahead Of October Budget

Labour Chancellor Rachel Reeves will deliver her first Budget this month. Labour has no plans to hike income tax but hasn't ruled out lifting capital gains tax on profits from the sale of assets. The Institute for Fiscal Studies cautioned that the Treasury must consider that a small group of rich people exiting the UK could leave a significantly "big hole in its finances." Economist Stuart Adam also explained that the high concentration of tax payments on a small group of people means piling exits could hurt public finances significantly. Meanwhile, a Treasury spokesperson recently pointed out that it was resolving "unfairness" in the tax system to raise capital for revamping public services.

UK Among Few Nations Expected To Reduce Individual Millionaires

The UK is projected to be among the three top nations that are expected to reduce individual millionaires in the coming years. As fears mount around Reeves pushing for tax hikes this month, former chancellor Nadhim Zahawi said the accelerating rate of millionaires leaving the UK is a "vote of no confidence" in the tax system. Zahawi added that potential Government measures that don't benefit businesses or encourage wealth creation are also among the factors driving the exodus. ASI's Millionaire Tracker suggests the UK could lose 9,500 "liquid millionaires" in 2024, reducing the total number of UK millionaire residents to 593,000.

In 2007, the country was housing 708,500 millionaires. Liquid millionaires are wealthy people with over $1 million in cash or investable assets. Many of those leaving are entrepreneurs and business owners, which will impact both investments in the economy and revenues required for rebuilding public services. Zahawi urged the Government to avoid any tax hikes during the Budget due October 30 and instead prioritise attracting rich people from other nations to reside and work in Britain. "Abandoning anti-non-dom policies and abolishing or cutting anti-wealth taxes would be a vital first step," he concluded.