The government is preparing to soften its proposed tax changes for non-domiciled residents, following concerns over the growing exodus of wealthy individuals from the UK.
Speaking at a fringe event during the World Economic Forum in Davos, Rachel Reeves confirmed that ministers will introduce an amendment to the Finance Bill. In response to reports of 10,800 millionaires having left Britain last year, Reeves said: “We have been listening to the concerns that have been raised by the non-dom community.”
Under the revised scheme, the government will broaden the criteria for its temporary repatriation facility, which allows non-doms to transfer funds swiftly to the UK without incurring substantial tax liabilities. Reeves sought to reassure critics by clarifying that double-taxation agreements will remain unaffected by these changes, specifically highlighting concerns raised by countries such as India. “That’s not the case: we are not going to change those double-taxation conventions,” she added.
A Treasury source underscored the government’s desire to make Britain’s tax regime more appealing to talented entrepreneurs and business leaders, while Business Secretary Jonathan Reynolds echoed support for attracting overseas wealth to the UK: “We welcome people coming to the UK and we’ll have a specific kind of tax treatment that they would expect.”
Nevertheless, tax advisers warn that the amendment may not be enough to prevent further departures of both non-doms and British entrepreneurs, who were unsettled by the hikes outlined in the autumn budget. Rachel De Souza, tax partner at RSM UK, described the move as “woefully inadequate”, saying it fails to address broader issues such as maintaining inheritance tax exemptions for offshore trusts and reversing proposed changes to agricultural and business property relief.
The forthcoming changes aim to simplify how income and gains in trust structures are allocated to beneficiaries and should increase the amount of distributions that qualify under the temporary repatriation facility. However, data from analytics firm New World Wealth and investment advisers Henley & Partners suggests the UK’s stance has already prompted a mass migration, with a net loss of 10,800 millionaires in 2024. This figure represents a 157 per cent rise on the previous year, putting Britain second only to China in the scale of affluent flight.
The exodus has largely been to other European hubs such as Italy and Switzerland, as well as the United Arab Emirates, and includes some of Britain’s wealthiest: last year, 78 centi-millionaires and 12 billionaires relocated. Stephen Kenny, head of private client at PKF Littlejohn, criticised the timing of the government’s decision: “Many in the industry raised the likely impact of these changes, and Labour has had the opportunity to reassure the internationally mobile community that the UK is open for business. But they have failed to heed the warning until too late.”
Kenny also cautioned that the government’s apparent U-turn may not stem the flow: “People feel it is impossible to remain in the UK, not only because of changes in the tax regime but because they have no confidence it won’t change further in the future. I doubt this announcement will do much to change people’s opinion.”
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Rachel Reeves to relax non-dom tax rules as millionaire exodus rises
