In 1799, King George III of England passed a law that allowed the rulers of the British Empire to avoid paying taxes in the UK if they spent most of the year outside Britain, managing their colonies around the world. Fast forward 225 years, the Empire is long gone, and the law now has a new purpose: billionaires living in the UK can avoid paying taxes on income earned abroad if their official residence is in another country. It’s a legal “trick” that helps attract the wealthy to London’s most exclusive neighborhoods, and the new Labour government has threatened to scrap it altogether, raising concerns among those millionaires.
In total, in 2023, there were 74,000 people who took advantage of this option. And according to a study published this Friday by Oxford Economics, Two thirds of these “non-domiciled” residents are preparing to leave the country in the next two years if the law changes and they are forced to pay income and inheritance tax. Specifically, 83% consider inheritance tax to be the main reason for moving to another country.
In April, the previous “conservative” government had already reduced benefits for “non-domiciled” millionaires, after a scandal broke out over the fact that The wife of the then Prime Minister, Rishi Sunak, took advantage of this law to avoid paying taxes.. Until now, full benefits lasted for 15 years and were reduced after that. This year’s legal reform reduced the grace period and set a timetable for its total removal. But the current Treasury Secretary, Rachel Reeves, is considering reducing the exemption to four years and requiring everyone who spends more than 10 years “residing” in the country to pay an inheritance, regardless of where they live. And this obligation would continue for 10 years after they leave the UK.
The result of these changes is that The march of millionaires that began in the spring has accelerated since Labour’s election victory: Many major capitals are preparing to leave for France, Greece, Cyprus, Italy, Malta, Spain or Portugal, which offer tax advantages of various types, such as the Spanish “Beckham law”. But the most attractive destinations remain tax havens, such as Switzerland, Dubai, Monaco or the various Caribbean islands that do not have personal income tax.
Thus, Oxford Economics calculations indicate that 9,500 billionaires could leave UK this yearwhich is more than double the steps recorded in 2023. As a result, the £3 million that the government wants to raise by increasing taxes on these assets could remain at £1 million (in the best case scenario) or even be reduced by £1 million, knowing that all these billionaires pay significant amounts of VAT (due to their high consumption of luxury goods) and council tax.
Indeed, the London property market is beginning to notice a drop in demand for these large assets. According to the Knight Frank agency, sales of homes valued at more than £10 million fell by 22% in the year to July, and those over 30 million have fallen by 75%.
But Stuart Bailey, head of super luxury sales at Knight Frank, believes the changes open up a new opportunity for a very specific group: American millionaires. The US already requires all its citizens to pay tax on anything they earn outside the country, so the changes to UK law would not affect them. AND The flight of the wealthy from the rest of the world eliminates competition for these homes.“Americans with a lot of money would have to be crazy not to think this is a great time to buy,” he said.
