Increasing Tax Revenues from Non-Doms: Change in Sight?

The latest statistics from the British tax authority show a significant increase in tax payments from individuals with Non-Dom status. In the fiscal year 2022-23, £8.9 billion was paid in taxes, representing a 6 percent increase compared to the previous year and marking the highest value since the rule changes in 2017. The total amount of British income tax, capital gains tax, and national insurance contributions from Non-Doms rose to £474 million. This coincides with an increase in Non-Dom individuals to 74,000, compared to 68,900 the previous year. There are no data yet on how Non-Doms are responding to the new government's plans to abolish the Non-Dom status and restrict tax privileges. Since March, when the previous Conservative government proposed changes, advisors to wealthy individuals have reported an increase in those planning to leave the United Kingdom. The current Non-Dom status allows individuals who reside in the UK but consider their permanent home to be outside the country to pay taxes only on their British income and capital gains. Foreign income and gains remain tax-free as long as they are not remitted to the UK. According to a Labour Party manifesto, the existing rules should be replaced with a modern system for individuals who stay in the country only temporarily. Furthermore, Non-Doms should no longer have the ability to permanently protect foreign assets from inheritance tax. Anthony Whatling of Alvarez & Marsal Tax predicts that the recent increase in Non-Dom numbers is likely to be short-lived, given the upcoming tax reforms from the Labour government. Within two years, these proposals could be reflected in the official statistics. The data already suggest that many Non-Doms are seriously considering relocating out of the UK. Elsa Littlewood of BDO also reports a growing number of Non-Doms accelerating their departure plans and expects an increase in emigration in the coming months. Nicholas Hyett from Wealth Club emphasizes that the statistics highlight the importance of a well-considered reform. A loss of £8.9 billion in tax revenues would not be insignificant, even though stricter taxation of the wealthy could generate more income. At the same time, he warns of the risk that the global elite might shift their taxable assets to countries with more favorable tax regimes. Rachael Henry from Tax Justice UK supports Labour's plans, arguing that it is only fair for all individuals living in the UK to contribute. This would direct much-needed financial resources to essential services such as hospitals and waste collection. According to HMRC's figures, Non-Doms and those with "deemed domicile" status contributed a total of £12.3 billion in the tax year 2022-23, slightly below the £12.4 billion of the previous year.