UAE second most popular destination for millionaires leaving the UK amid tax hikes

The UAE has become the second most popular destination for high-net-worth individuals looking to leave the UK ahead of changes to the tax regime, figures from investment experts Henley & Partners showed.

Last year a record number of millionaires left Britain, with more than 800 relocating to the UAE. The highest number, around 6,500, headed to the EU. Nassef Sawiris, Egypt’s wealthiest person and owner of Aston Villa football club, announced at the end of 2023 that he was moving his family office to Abu Dhabi.

Keir Starmer's government has announced changes to the tax system, which will see current non-doms’ overseas assets subjected to UK inheritance tax for the first time from April. Previously, non-doms paid a £30,000 annual fee to HM Revenue & Customs to protect their offshore income and gains.

Figures compiled by global analytics firm New World Wealth and investment migration advisers Henley & Partners revealed the exodus accelerated after the general election in July, which saw Mr Starmer's party take power after 14 years of Conservative government. Britain lost a net 10,800 millionaires to migration last year, a 157 per cent increase on 2023.

A survey by economic advisory firm Oxford Economics found that nearly two thirds are planning to leave the UK or considering doing so because of the changes.

“At Autumn Budget 2024, the UK government confirmed plans to replace the remittance basis with a short-term tax regime for 'qualifying new residents' and to change the tests for exposure to inheritance tax, in both cases with effect from April 2025,” it said.

“These reforms will change the way many non-UK domiciled individuals are taxed on their foreign income and gains and affect their exposure to inheritance tax.

“The decision to change the tax rules on non-doms was based on the Office for Budget Responsibility’s estimate that abolishing the non-dom regime will raise around £3 billion annually in steady state. This OBR figure differs substantially from our recent analysis, which found that the reforms could cost the Exchequer up to £0.9 billion per annum.

“The risks associated with the non-dom tax reforms have also been highlighted by other institutions. The Adam Smith Institute estimate that by 2035, these reforms will make the economy £1.3 billion smaller than it would otherwise have been, which could lead to over 23,000 job losses.

“Similarly, the Growth Commission has warned that abolishing the non-dom regime will hinder prospects for economic growth, potentially decreasing GDP by 0.5 per cent and reducing revenue by £5 billion.”

According to the UK government's own website, from April 6, “the test for whether non-UK assets are in scope for IHT [inheritance tax] will be whether an individual has been resident in the UK for at least 10 out of the last 20 tax years immediately preceding the tax year in which the chargeable event (including death) arises”.

At the moment, if a non-dom dies, the UK-based part of their estate is subject to inheritance tax. All their overseas assets – property, trusts, cash and bank accounts – that are held outside Britain are not subject to UK inheritance tax. But from April 6 they will be.