Concerns Emerge Over Potential Tax Exodus of UK’s Super-Rich

Sixty of the wealthiest individuals in the United Kingdom have collectively contributed over £3 billion annually in income tax, according to findings by the BBC. This contribution is equivalent to approximately two-thirds of the additional spending commitments outlined in the Labour Party‘s manifesto earlier this year.

Each of these 60 individuals recorded an income of at least £50 million in the fiscal year 2021/22, although many are believed to earn significantly more and pay substantial amounts in other forms of taxation. Concerns have been raised that prospective tax increases in the forthcoming budget may drive some ultra-wealthy individuals to relocate, consequently impacting UK financial health.

While Labour has ruled out any changes in income tax, Chancellor Rachel Reeves has not dismissed the possibility of other tax hikes. A Treasury spokesperson affirmed the government’s commitment to “addressing unfairness in the tax system.”

Swiss banking giant UBS previously predicted in July that the UK might see a loss of half a million millionaires by 2028, partly due to some moving to countries with more favorable tax regimes. The Institute for Fiscal Studies cautioned the Treasury that even a slight number of departures within this demographic could create a “relatively big hole” in national finances.

Nonetheless, the Green Party has challenged assertions that increased taxes would drive the wealthy to leave the UK, pointing to previous tax regime changes that did not result in a significant exodus. Carla Denyer, co-leader of the Green Party, emphasized factors such as work, family, and culture as influential reasons for the wealthy to remain in the UK, even at the cost of higher taxes.

The UK’s income tax receipts for 2021/22, totaling £225 billion, included contributions from around 33 million taxpayers. However, the 60 individuals with incomes above £50 million per year comprised a mere 0.0002% of taxpayers and accounted for 1.4% of the total income tax collected. Initially, HMRC declined to release these figures, citing concerns over identifying the individuals, but eventually disclosed the data following persistent requests from the BBC.

Addressing concerns about potential wealthy migrations, the IFS has suggested the implementation of an “exit tax”. As outlined by Stuart Adam, a senior economist at the IFS, such a tax could target gains accumulated while residing in the UK, even if the assets are sold after leaving. Similarly, those who accrued gains before moving to the UK might be exempt from certain taxes even if sold while residing in the country.

The Treasury has stated its dedication to revising the outdated non-dom tax regime, replacing it with a new system aimed at drawing talent and investment to the UK. The spokesperson assured the public of efforts to “raise the revenue to rebuild our public services” through these changes.