Rachel Reeves is watering down her tax raid on non-doms amid an exodus of millionaires from the UK.
The chancellor is to amend some of the changes to tax rules for non-domiciled individuals announced in October’s Budget.
Speaking on the sidelines of the World Economic Forum in Davos, Ms Reeves said the government will table an amendment to the finance bill to address some of the concerns raised by non-doms.
She told Wall Street Journal editor Emma Tucker: “We have been listening to the concerns that have been raised by the non-dom community.
“And in the finance bill, we will be tabling an amendment which makes more generous the temporary repatriation facility, which enables non-doms to bring money into the UK without paying significant taxes.”
The facility is a three-year window where non-doms pay a discounted rate on foreign income and capital gains accrued before April 2025, letting them bring money into the UK with a minimal tax bill. Treasury officials stressed that the non-dom tax changes will still raise the same amount of money, an estimated £33.8bn over five years.
And the chancellor offered reassurance to non-doms worried about becoming liable for double taxation, adding: “There’s been some concerns from countries that have double taxation conventions with the UK, including India, that they would be drawn into paying inheritance tax.
“That’s not the case: we are not going to be changing those double-taxation conventions.”
A Treasury source told The Times: “We’re always interested in hearing ideas for making our tax regime more attractive to talented entrepreneurs and business leaders from around the world to help create jobs and wealth in the UK.”
The Conservatives said Ms Reeves’ Budget is “falling apart in front of our eyes”, but warned that “the damage is already done”.
Shadow chancellor Mel Stride said: “At the election Labour said their plans would raise money, now they have been forced to admit their plans make the UK less attractive.
“But the damage is already done – tax revenue equivalent to hundreds of thousands of taxpayers has already been lost. Labour simply does not understand business and the economy, and working people are paying the price.”
He said Ms Reeves is “obviously out of her depth” and risked “losing control of the public finances”.
A spokesman for Reform UK said: “Rachel Reeves’ budget has been a disaster for Britain. The only surprise is that it’s taken her this long to realise it.” Meanwhile critics said if Ms Reeves was prepared to take feedback on her non-dom changes, she should be prepared to rethink changes to inheritance tax for farmers and small business owners.
Mo Metcalf-Fisher, external affairs director of the Countryside Alliance campaign group, said the optics of Ms Reeves’ decision are “astonishing”.
He told The Independent: “If Rachel Reeves is accepting that errors have been made in her recent budget, we look forward to a similar urgent review of her disastrous family farm tax, which threatens our national food security.”
Law firm Mishcon de Reya’s head of private wealth and tax Charlie Sosna said clients will welcome the chancellor’s climbdown on the non-dom tax grab.
“Many significant clients have looked to relocate to their home countries, or other countries looking to attract their talent and wealth,” he said, adding that it is “understandable that the Treasury has taken stock of the reaction and decided to act to minimise the loss of these individuals”.
But Dominic Lawrance, partner at international law firm Charles Russell Speechlys, said that despite the changes Ms Reeves is still “failing to understand the issues which are driving this economically catastrophic development”.
“If the exodus is to stopped, far more radical change is needed, in the form of a special tax regime for internationally mobile individuals, which is genuinely attractive and competitive,” he said.
Mr Lawrance said the current Treasury plans look like “a rearrangement of deck chairs on a stricken liner”.
And partner at consultancy RSM Chris Etherington said the watering down by the chancellor is welcome but warned it may be “too little, too late”.
He said: “If the target of any changes is limited to the temporary repatriation facility, that is unlikely to be enough to stem the tide of those leaving.”
Mr Etherington said that to stem the flow of wealthy individuals leaving the UK, a more significant change in Labour’s plans will be needed.
The non-dom tax loophole, which lets foreign nationals living in Britain avoid paying tax on overseas earnings, was thrust into the spotlight when The Independent first revealed that Akshata Murty, Rishi Sunak’s wife, had used it to save potentially millions of pounds.
Ms Murty, whose family business is estimated to be worth around £60bn, later said she would no longer claim the status on her worldwide earnings. At the time, she said she did not want her tax status to be a “distraction for my husband or to affect my family”.
Since Labour came to power in July, the UK has lost a millionaire every 45 minutes, with the exodus driven by Labour’s tax grabs and a lack of business confidence.
Britain lost a net 10,800 millionaires last year, a 157 per cent increase on 2023, including 78 centi-millionaires (worth at least £100 million) and 12 billionaires. They left for other countries mainly in Europe, such as Italy and Switzerland, as well as the United Arab Emirates.
The figures, compiled by the analytics firm New World Wealth, show the exodus sped up after the general election was called and that since then a ‘dollar millionaire’ has left Britain every 45 minutes.
Tax planners have repeatedly warned of an exodus of Britain’s super wealthy, with many blaming the impact of Ms Reeves’ first Budget in October.
Adam Smith Institute (ASI) research showed that each of the millionaires who left Britain last year would have paid at least £393,957 in income tax per year.
The free market think tank said one millionaire’s tax payment is equivalent to that of 49 average taxpayers, meaning the millionaire exodus is comparable to 529,200 average taxpayers leaving the country.
A Treasury spokesperson said: “While we do not expect these changes to impact the £33.8bn of tax revenue that the OBR forecast to raise over five years, they reflect our continued engagement with stakeholders to make sure the reforms announced at Budget operate as intended. The Temporary Repatriation Facility is designed to encourage non-doms to bring their funds to the UK, encouraging them to spend and invest this money here.”
