Let the non-doms leave

Rachel Reeves is reportedly considering changes to the rules around 'non-doms' – people who declare themselves to be 'non-domiciled' in the UK in order to pay less tax – in response to a protracted media campaign against the policy. On a daily basis, newspapers from the Telegraph to the Independent are warning that the abolition of the non-dom regime is causing an exodus of millionaires. This week, estate agents have protested that the top end of the London property market is now in freefall. The mansions stand empty!
Questions to ask about these reports include: are they bullshit? And why should I care? Does it matter if the non-doms are leaving? New research suggests a surprising answer.
Firstly, these claims have at least a whiff of the farmyard in that they are being made by people who have a clear financial interest in the matter. If I was selling prime central London property, I would definitely use the media to push the narrative that the wildly overpriced houses I was pushing were in fact going for a song.
That's not to say they're lies, but they are claims made in the absence of the actual data on non-doms (which will be released by HMRC next month). Fortunately, there is other data that does tell us a verifiable story about what happens when you change the non-dom rules, because these rules have been changed before – by George Osborne, in 2017. The changes Osborne announced in his 2015 Budget amounted to a £1.5bn tax hike on non-doms. Last month, a study was published which shows what happened next.
Immediately after the 2015 Budget, the emigration rate of non-doms rose, peaking in 2018 – but by 2019, it was lower than it had been before the change was announced. So the policy was announced and an 'exodus' appeared to follow, but it wasn't an exodus. It was people bringing forward a change they had been planning to make anyway.
The second conclusion was even more important: the people who paid the least tax were the most likely to leave. The millionaires who left were the fiscally useless, the do-nothing rich.
A common misconception is that rich people are economically similar. But there are two very different species: people who earn loads of money and people who have loads of money. People who earn lots of money typically pay a lot of tax. A banker in London on £600,000 a year should pay about £245,000 in income tax and National Insurance (assuming maximum pension contributions), contributing as much to the state in three years as the average Brit contributes over their whole working life. This makes them very important from a fiscal point of view. But it also means they're less likely to leave when there's a tax change, because they have a great job that it would be hard to get elsewhere, and because they demonstrably already tolerate a high level of taxation. And after the 2015 Budget, this is what they did: they stayed.
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The other species are different. They are simply parking their wealth here, paying little tax, and leaving when the rules change. Arun Advani, the economist who led this research, told me that under the non-dom regime, the UK had effectively been a tax haven for people who had money here but didn't earn money here: 'Everyone thinks, because they're very wealthy, that means they must be paying a lot of tax,' he said, but the people who left after 2015 were recognisable as being 'not very well connected' to the economy by income – 'but that's also why they weren't paying very much tax. So the cost of losing them is much lower.'
It's very possible that this is what's happening now: we are losing people whose connection to the economy was fleeting and low in value.
The stateless rich will be missed in some parts of London. Showrooms for ugly, dangerous cars will fall quiet; gaudy clothes with someone else's name written all over them will go unsold; bad Mayfair restaurants and galleries for gaudy, laughable art will have to reconsider their value propositions. But the rest of us might benefit, thanks to the property market.
Expensive London property drags the rest of the housing market upward, imposing trickle-down inflation on homeowners. It also eats into our housebuilding capacity. When I walked through London's wealthiest constituency with its MP, Joe Powell, recently we had to raise our voices over the sound of drills: every other property was a building site, an investment being serviced. The UK currently spends around £3bn a month on repair and maintenance of existing housing, more than six times what it spends on building new public housing. If the non-doms leave, housing might become both more affordable, and easier to build, for people who want to live here for reasons beyond their tax bill.
It's also worth noting that leaving the country – any country – is something the stateless rich do constantly. In a normal year, with no tax changes announced, around a quarter of non-doms who have arrived recently (within the last two years) will leave anyway, and even among long-stayers (up to 15 years), one in 25 will leave each year. Maybe shopping in Harrods and driving a Lamborghini leaves you feeling empty and bored, and forces you to roam the planet seeking a fulfilment money can never buy? Who cares. They're off to Dubai. Before the government performs another U-turn, it should ask whether anyone will miss them.
[See also: Has Rachel Reeves given in to the non-doms?]
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Tax hike fears mount after government borrowing jumps in May

Leader Live

an hour ago

Leader Live

Tax hike fears mount after government borrowing jumps in May

The Office for National Statistics (ONS) said borrowing surged to £17.7 billion last month, the second highest figure on record for May, surpassed only at the height of Covid. May borrowing was £700 million higher than a year earlier, though it was slightly less than the £18 billion most economists had been expecting. The higher borrowing came in spite of a surge in the tax take from national insurance after Chancellor Rachel Reeves increased employer contributions in April. The decision, which was announced in last autumn's budget, has seen wage costs soar for firms across the UK as they also faced a minimum wage rise in the same month. Experts warned the higher borrowing figures raised the chances of tax hikes to come in the budget later this year, with Ms Reeves under pressure to balance the books amid rising borrowing and her spending commitments. Thomas Pugh, economist at audit and consulting firm RSM UK, said he is pencilling in tax increases of between £10 billion and £20 billion. He said: 'The under-performance of the economy and higher borrowing costs mean the Chancellor may already have lost the £9.9 billion of fiscal headroom that she clawed back in March. 'Throw in the tough outlook for many Government departments announced in the spending review and U-turns on welfare spending and the Chancellor will probably have to announce some top-up tax increases after the summer.' Danni Hewson, AJ Bell head of financial analysis, said the borrowing figures 'will only add to speculation that the Chancellor will have to announce more spending cuts or further tax increases at the next budget if she wants to meet her fiscal rules and pay for her spending plans'. 'One big shock could wipe out any headroom Rachel Reeves might have, and there are still question marks about how much of GDP (gross domestic product) should be spent on defence and where the money is going to come from,' she added. Borrowing for the first two months of the financial year to date was £37.7 billion, £1.6 billion more than the same two-month period in 2024, according to the ONS. The data showed so-called compulsory social contributions, largely made up of national insurance contributions (NICs), jumped by £3.9 billion or 14.7% to a record £30.2 billion in April and May combined. Rob Doody, deputy director for public sector finances, said: 'While receipts were up, thanks partly to higher income tax revenue and national insurance contributions, spending was up more, affected by increased running costs and inflation-linked uplifts to many benefits.' While May's borrowing out-turn was lower than economists were expecting, it was more than the £17.1 billion pencilled in by the UK's independent fiscal watchdog, the Office for Budget Responsibility (OBR), in March. The figures showed that central government tax receipts in May increased by £3.5 billion to £61.7 billion, while higher NICs saw social contributions rise by £1.8 billion to £15.1 billion last month alone. Public sector net debt, excluding public sector banks, stood at £2.87 trillion at the end of May and was estimated at 96.4% of GDP, which was 0.5 percentage points higher than a year earlier and remains at levels last seen in the early 1960s. The ONS said the sale of the final tranche of taxpayer shares in NatWest, formerly Royal Bank of Scotland, cut net debt by £800 million last month, but did not have an impact on borrowing in the month. Interest payments on debt, which are linked to inflation, fell £700 million to £7.6 million due to previous falls in the Retail Prices Index (RPI). But recent rises in RPI are expected to see debt interest payments race higher in June. Chief Secretary to the Treasury Darren Jones insisted the Government had 'stabilised the economy and the public finances'. 'Since taking office, we have taken the right decisions to protect working people, begin repairing the NHS, and fix the foundations to rebuild Britain,' he said.