Millionaire exodus spells trouble for Labour Clutch Fire

This report is from this week’s CNBC’s UK Exchange newsletter. Each Wednesday, Ian King brings you expert insights on the most important business stories from the U.K. and the key personalities shaping the news. The newsletter will also highlight other key developments in the U.K. that you won’t want to miss, plus a preview of essential events that are set to make waves. Like what you see? You can subscribe here.

For most of this century, the U.K. — and London in particular — has been one of the most popular destinations for the world’s super rich to live, work and play in.

The U.K.’s approach in this period was best summed-up by Peter Mandelson, a senior minister in Tony Blair and Gordon Brown’s Labour governments and now U.K. ambassador to the United States. In 1998 he told a group of Silicon Valley business leaders: “We are intensely relaxed about people getting filthy rich as long as they pay their taxes.”

However, that is now changing as the wealthy flee a punitive new tax regime, with potentially severe consequences for the country.

Arguably this began when Russia invaded Ukraine in 2022 and hundreds of Russian oligarchs left the U.K. after being sanctioned. This in itself was meaningful; the upmarket estate agent Aston Chase estimated that, at the time of the invasion, some 150,000 Russians were living in ‘Londongrad’ owning £1.1 billion ($1.5 billion) worth of residential property.

But that was a specific Russian issue and apart from those who had profited from Russian activity, few mourned their departure.

Things began to change more broadly during the run-up to last year’s general election, when Jeremy Hunt, then Chancellor of the Exchequer, sought to steal the clothes of his Labour rivals in his March 2024 Budget.

He announced that, as of April 2025, the U.K. would abolish so-called ‘non-dom’ status — a quirk of the tax system dating back to 1799, that allowed wealthy people living in Britain but who did not consider it to be their permanent home, or ‘domicile,’ to pay U.K. tax only on income earned in, or transferred to, the country.

This had been a flagship Labour policy and Labour had made hay from the fact that Akshata Murty, the Indian-born wife of Rishi Sunak, the former prime minister, was one of around 74,000 people who had enjoyed non-dom status in 2022-23 (the latest tax year for which figures are available).

Hunt claimed replacing non-dom status with his “simpler, residency-based system” would raise £2.7 billion annually. Crucially, though, he chose not to subject overseas assets placed in offshore trusts by non-doms to U.K. inheritance tax.

When Labour won the election, in July last year, newly-appointed Chancellor Rachel Reeves, decided she needed to maintain the party’s leadership on the issue. So she abolished the exemption on offshore trusts — potentially exposing the entire global wealth of these individuals to the 40% levy.

Overnight it turned the U.K. from one of the most attractive destinations for the world’s wealthiest people into one of the most expensive places in the world to die.

The upshot has been an exodus of the super rich.

It is hard to know precisely how many people have left. The analytics firm New World Wealth and the investment migration advisers Henley & Partners suggested in March this year that Britain had lost a net 10,800 millionaires to migration in 2024, up 157% on 2023 and more than any other country except China.

Some dispute those figures, among them Stephen Kinsella, a legal advisor and member of Patriotic Millionaires U.K., a nonpartisan network of British millionaires calling for a wealth tax. He told me recently the numbers were an extrapolation based on the number of people on LinkedIn who had said they had left.

He added: “There are about 3 million millionaires in Britain so, even if 10,000 had left, that would be about 0.3% of millionaires.”

Henley & Partners and New World Wealth published a new report last week predicting that 16,500 millionaires would leave the U.K. this year, more than twice as many had been expected, representing the highest net outflow of high-net-worth individuals from any country since they began tracking millionaire migration 10 years ago.

Although the actual numbers will not be known until the U.K. tax authorities crunch the numbers some years hence, there have been plenty of straws in the wind. LonRes, which tracks activity in London’s prime property markets, estimates there were 36% fewer transactions involving such homes in May this year than in the same month last year. Meanwhile, Companies House data suggests more than 4,400 directors have left the U.K. in the last year, with departures accelerating in recent months.

Among those leaving have been some very high-profile individuals, including Richard Gnodde, the South African-born vice chairman of Goldman Sachs; Nassef Sawiris, Egypt’s richest man and co-owner of Aston Villa FC co-owner and John Fredriksen, the Norwegian-born shipping magnate. Lakshmi Mittal, the Indian-born steel billionaire who regularly tops the rankings of Britain’s richest people, is said to be weighing up his options and is widely expected to give up his U.K. tax residency.

Compounding the problem is that other countries are currently welcoming the rich with open arms. They include Italy, where Gnodde has relocated, which allows wealthy foreigners to pay an annual fee of up to 200,000 euros to exempt their overseas assets and income from tax. The top destination for migrating millionaires though, is the United Arab Emirates, now home to Sawiris and Fredriksen. The latest Henley & Partners/New World Wealth report predicts it will attract a net 9,800 millionaires this year.

None of this has yet appeared in the U.K.’s fiscal forecasts. Indeed, the independent Office for Budget Responsibility still assumes Reeves’ move will raise £2.7 billion in extra taxes a year by 2028-29. It assumes that between 12%-25% of non-doms would go, which now looks an underestimate.

Research published by the consultancy Oxford Economics in September last year, based on a survey of non-doms and their advisors, suggested 63% would leave within two years of the measure being implemented. Survey aside, Oxford Economics expects up to 32% of non-doms to leave and under that scenario, with non-doms having paid £8.9 billion in taxes in 2022-23, the policy would start costing the Treasury money.

It is not just the foregone taxes such people would have paid that will hurt. Thousands of jobs in sectors like retail, hospitality, legal services and luxury goods depend on the continued presence in the U.K. of the former non-doms. Scores of charities, cultural and sporting institutions depend on their patronage and philanthropy. There would therefore be a much broader impact than just the fiscal one.

Belatedly, the government has realized it has a problem. Unfortunately, it is probably too late to lure back those non-doms who have already gone, along with others who have left due to the imposition of VAT on school fees and changes in agricultural property relief and business property relief that exposed previously exempt estates and businesses to inheritance tax for the first time.

However, the government can still act to stop further departures. The most effective thing to do would be to restore the exemption from inheritance tax granted to offshore trusts. This would be problematic for Reeves, since taxing the wealthy more is highly popular among Labour voters, even when — as one poll last weekend suggested — it hurts the public finances.

But the Chancellor needs to find some way of backing down without it looking too much like a U-turn. And, with many wealthy people looking to relocate in time for the start of the new school year in September, she should probably not leave it until her autumn Budget.

— Ian King

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