As the date for Rachel Reeves's first Budget approaches, a growing number of wealthy individuals and entrepreneurs are reportedly departing from Britain. This exodus is primarily driven by concerns over potential tax increases, particularly in capital gains tax (CGT).
Financial advisers and business leaders have observed this trend, with many affluent clients opting to relocate overseas. Ceri Vokes, a partner at Withers Worldwide, noted that individuals with substantial wealth are among those leaving, as "changes can be more impactful for them."
Popular destinations for these relocations include Italy, the United Arab Emirates, and Switzerland. These countries are known for their favorable tax regimes and financial privacy laws, making them attractive to high-net-worth individuals seeking to protect their assets.
The potential changes to the UK tax system have sparked various strategies among business owners and investors. Some are rushing to sell their companies before the Budget announcement on October 30, 2024, while others are exploring tactics such as the "bed and breakfast" method to mitigate potential tax liabilities.
Tim Stovold, a tax expert at Moore Kingston Smith, highlighted the current climate of uncertainty, stating that people are "so terrified" of a CGT rate increase that their decisions are becoming "entirely tax-driven."
"With increased mobility in the digital age, there could be a considerable exodus and avoidance in the event of a capital gains crackdown."
Industry leaders caution that this exodus could have long-lasting effects on the UK economy. Brent Hoberman, founder of Lastminute.com, emphasized the mobility of entrepreneurs and the potential loss of talent if policies are not perceived as entrepreneur-friendly.
The Labour Party's stance on taxation, particularly their plans to abolish the non-dom regime and potentially increase CGT rates, has intensified concerns among wealthy individuals. The non-dom status, which allows foreign individuals to live in the UK without paying tax on overseas income, has been a subject of political debate for years.
As the Budget approaches, the Treasury faces the challenge of addressing a £22 billion hole in public finances while balancing the need to retain and attract wealth creators. The outcome of these decisions could significantly impact the UK's position as a hub for tech startups and entrepreneurs, a status it has been cultivating in recent years.