January 15, 2023

Threats to non-doms are scaring them away

Threats to non-doms are scaring them away

New research by Pinsent Masons shows the numbers of new non-dom taxpayers fell by 40% in the year to April 2021, from 14,200 to 8,500. Overall non-dom numbers fell by 11%.

UK non-doms are persons who are resident in the UK but do not intend to live here permanently and so are taxed on their UK income but not their world-wide income.

They are a classic example of globally mobile taxpayers, usually working outside the country of their citizenship. Having income and assets in different countries requires them to decide where to pay their taxes.

Earnings from Asian/American business interests while residing in UK means they pay some taxes in UK and some overseas. Ending non-dom status means most will pay all taxes overseas.

Non-doms are key to the UK’s dynamic economy. Over 20 percent of top-earning international bankers have claimed non-dom status.

Many of the top 1 percent earning over £125k a year — including two-fifths of top earners in the oil industry and a quarter in the car industry — have been non-doms.

The Conservative government in 2011 and 2015 made the non-dom regime significantly less attractive and recently Labour has committed to abolishing it altogether, claiming this will somehow raise lots of revenue. It won't. It will cost us all more to make up the fall in revenues.

The Labour Party wants to abolish non-dom status.

The result has been a huge reduction in the number of non-doms accompanied by a reduction in the tax revenue they pay.

We don't have the latest figures on revenue yet, but the amount of tax paid by non-doms fell by £2 billion from £9.65 billion in 2017 to £7.65 billion in 2018.

Sophie Warren of Pinsent Masons, said “Non-doms make a highly valuable contribution to the UK economy and any substantial falls in their number could have a significant long-term impact."

"The government needs to consider what it may lose by placing their status under threat."

"Many non-doms are highly successful entrepreneurs who have established or invested in UK companies… Non-dom status gives the UK a competitive advantage in attracting talented and wealthy individuals. Altering this status now would cause many to consider relocating.”

Plenty of other countries will be keen to take our non-doms. For example Italy, Ireland, and Portugal have attractive non-dom regimes and will seek to attract non-doms who are leaving Britain so they can invest in their countries instead.

Essentially the British problem is a political one. Labour promotes taxing non-doms as some kind of golden pot at the end of the rainbow that will enable them to finance all sorts of new spending.

The Conservatives are too timid to argue the case.

Britain has been a global centre of finance and talent. We can, of course, choose to drive that finance and talent away, but the rest of us will have to pay higher taxes and watch Britain decline even more quickly.