The countries welcoming Britain’s spurned non-doms with open arms

Even before the Chancellor formally announced plans to abolish Britain’s non-dom tax regime in the Budget, the super-rich were gearing up to leave.

“I spoke to a client on Wednesday morning and his view was very much that if things didn’t go according to plan then he would leave,” says Rachel de Souza, partner at RSM.

For this individual, the solution was easy – he already has a property in the Caribbean, says de Souza, and plans to decamp.

It is likely to be just the start of a mass departure. Advisers say lower tax regimes around the world such as Dubai, Italy and Switzerland are about to get an influx of high net worth individuals as Britain’s non-doms scramble to restructure their finances in the wake of Jeremy Hunt’s Budget measures.

Under Britain’s current system, people who live in the UK but have a permanent home abroad (known as non-domiciled, or non-doms) get a big tax perk. They can opt to pay tax on overseas earnings on a “remittance basis”.

This means they are only charged UK tax on this income if it is brought (or “remitted”) into the country. In other words, they save a lot of money.

Now this system is about to disappear. In a move that will raise £2.7bn per year in extra taxes by 2028-29, Mr Hunt announced in the Budget that he will scrap the remittance system from April 2025. This means non-doms will have to pay more tax.

“Without a doubt there will be some that go – and my expectation is the ones that go will be at the wealthier end of the spectrum,” says de Souza.

“These people already have homes overseas. For them, it’s really quite easy. They don’t need to go through a process of deciding where to go, buying a house, furnishing a house. It is really just a question of buying a plane ticket.”

Switzerland and Dubai are the two places most popular with those looking to relocate for tax purposes, says de Souza.

Dubai has no personal taxes whatsoever, while non-tax residents in Switzerland pay tax only on Swiss sources of income and wealth.

“When Norway introduced the wealth tax their billionaires, all upped and left and they went to Switzerland,” says Christopher Groves, a partner at high-end international law firm Withers.

Italy will also be a particular magnet, says Groves. In 2019, it introduced a new tax regime designed to attract particularly high net worth individuals, which charges a flat €100,000 (£85,500) tax on all foreign income.

“Italy I think has got its nose in front on this,” says Groves.

“There was a time when if you wanted to be in a low-tax regime you’d need to go and live in the Channel Islands or the Caribbean or somewhere.

“But that’s no longer the case. It’s not just a question of saying ‘well no one’s going to move to Barbados because they won’t want to live there’. They can go live in Milan, not too different from London.”

Of course, island life may still hold some appeal. In Jersey, income tax is charged at a flat 20pc rate, there is no capital gains tax, and non-residents pay no tax on company dividends.

Malta and Ireland also offer a remittance basis of taxation, akin to the existing non-dom system in the UK, says de Souza.

Singapore may be popular, says Craggs. Here, residents generally pay no tax on foreign income, including dividends from foreign companies and rent from overseas properties.

“This is even the case where the foreign-sourced income is remitted to Singapore,” he adds.

Cyprus also offers a broad range of big tax exemptions for non-doms which mean they effectively pay no tax on worldwide dividend and interest income, says Craggs. 

One key concern is the direction of travel. According to the polls, Labour are poised to win the general election this year.

“Clients are asking do you think Labour would stick with this if they win an election or do you think they’ll make it more difficult for me?” Thomas Adcock, tax partner at Gravita.

The impact of Mr Hunt’s policies could extend far beyond the international elite.

The regime change might also encourage British people to leave for inheritance tax purposes, says Chris Etherington, private client partner at RSM. 

Scrapping the concept of domiciled for tax purposes will likely mean that tax will be tied to residency, says Etherington.

“People in their 70s may become much more inclined to leave the UK. It’s not confirmed, but it looks like if they leave the UK then they will be outside the inheritance tax net entirely.”

Perhaps it will not just be the super-rich jetting off for sunnier climes after all.