The Wealth Exodus: The UK's Tax Gamble and the Non-Dom Dilemma

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It is said that a nation’s tax policy is often its unofficial welcome mat—or indeed, a discreet invitation to leave. As the UK tightens the fiscal screws on its non-domiciled residents (“non-doms”), the mat seems to have been flipped over and replaced with a “No Entry” sign in brass. 

This week marks the implementation of sweeping changes to the UK's non-dom regime, spearheaded by Shadow Chancellor Rachel Reeves and forecast to accelerate under a future Labour Government. While presented as a move toward “tax fairness”, the practical effect is anything but equitable and is already triggering alarm bells across private client advisers, family offices, and international tax professionals. 

So, what’s changing? 

Under the existing regime (soon to be consigned to the tax archives), non-doms who reside in the UK could elect to be taxed on the remittance basis. That is, they only paid UK tax on their UK-source income and gains, and foreign income or gains brought into the UK. For many high-net-worth individuals (HNWIs), this allowed them to live and invest in the UK while continuing to manage their international financial affairs in a tax-efficient manner. 

However, the new proposals aim to remove the remittance basis entirely, replacing it with a residence-based system. This means that once a person becomes UK tax resident—regardless of their domicile—they will be taxed on their worldwide income and gains. The Adam Smith Institute has painted a rather bleak picture: a combined effective tax rate of up to 67% on profits and dividends from foreign businesses, a figure that, frankly, would make even the most hardened tax adviser wince. 

Let us break this down. A foreign company, owned by a UK-resident non-dom, generates profits. Those profits are taxed at 45%—either under the transfer of assets abroad rules (see ITA 2007, s.720) or potentially caught under the Controlled Foreign Companies (CFC) regime if there's a UK-resident company involved (TIOPA 2010, Part 9A). Then, when those profits are extracted as dividends, they could be taxed again at the upper dividend rate—currently 39.35%. Double taxation, with a twist. 

A real-world example? 

Let us consider Isabella, an Italian national, who has lived in London since 2016 under the remittance basis. She owns a successful olive oil export business based in Tuscany. Under the current rules, so long as Isabella doesn't bring her profits into the UK, she avoids UK taxation on that income. But from Sunday, that income will be fully taxable in the UK—despite the fact it is earned abroad, taxed abroad, and reinvested abroad. The result? A tax bill that could leave her with less than one-third of her net profits. 

Understandably, Isabella is now exploring a relocation to the UAE—where the olive oil is just as good, and the tax rate is 0%. 

What are the broader implications? 

The statistics are sobering. According to data cited in the ASI's recent report, a staggering 30 millionaires left the UK every day in 2024, double the rate of the previous year. These are not idle oligarchs but rather entrepreneurs, investors, and innovators—the very individuals whose businesses employ people, whose spending supports local economies, and whose philanthropic donations build hospitals and fund education. 

To quote Sam Bidwell of the Adam Smith Institute: “Taxing the foreign businesses of non-doms at rates of up to 67% is the kind of behaviour we might expect from an authoritarian regime – not from the birthplace of capitalism.” 

Indeed. 

Our view at LEXeFISCAL LLP 

At LEXeFISCAL LLP, we believe the United Kingdom must remain open for global business. Fair taxation is one thing; fiscal hostility is quite another. These legislative changes are not merely technical—they are strategic disincentives to remain in the UK. And we see no clear transitional protections, sunset clauses, or even a hint of proportionality in what is being proposed. 

For those affected, the time to act is now. 

We are currently advising clients on strategic exits, tax residency restructuring, double tax treaty planning (especially under the UK-Italy and UK-UAE treaties), and international trust realignment. Whether you are considering a move to Europe, the Caribbean, or beyond, our cross-border legal and tax team stands ready. 

What should you do next? 

If you are a UK resident non-dom—or a business owner with substantial foreign income—do not wait until HMRC knocks at your door. Early planning is not only prudent, but essential. Contact our team at LEXeFISCAL LLP for a confidential consultation. We are here not just to advise—but to solve your problems. 

In the spirit of our motto, Vincent Veritas, we invite you to think inside the law, before you think outside the box. 

Contact us today:

Email: info@lexefiscal.com

Tel: +44 (0)208 092 2111