UK Non-Dom Reforms: Reality Check After Labour's First Year
- Sophie Bell
- Aug 26
- 3 min read
The headlines scream of mass exodus, but is everyone really leaving? According to John Barnett, partner at Burges Salmon and Vice President of the Chartered Institute of Taxation, the reality of Labour's non-dom reforms is far more nuanced than the dinner party conversations suggest.
Labour's First Year: Unprepared but Technocratic
John describes Labour's first year in power with three key words: unprepared, ideological, and technocratic. While the party was "really prepared for a General Election," they suddenly found themselves needing to govern without that insider knowledge of what was actually involved.
The ideological aspect is evident in their tax measures. "VAT on school fees, VAT on private jets, carried interest, agricultural and business relief - even non-dom reforms raise peanuts in government terms," he notes. These measures weren't designed to raise significant revenue but to fulfil manifesto promises made to Labour Party members over the past 15 years.
However, there's a silver lining. Unlike previous governments that moved political allies into key departments, Labour ministers have been shadowing their portfolios for several years. This technocratic approach means they're genuinely interested in technical details - something John welcomes as a tax lawyer. He described it as refreshing “to be able to discuss s721B(2) with the Minister and find that he was genuinely interested in the legislative drafting”
The Numbers Game: What Really Matters
To put the non-dom reforms in perspective, John highlights that only three taxes genuinely raise money for the government: income tax, VAT, and national insurance contributions. The 1.2% National Insurance increase alone raises £122 billion over five years, dwarfing everything else.
Non-dom reforms are projected to raise £21 billion over five years - making them the second or third largest revenue measure. However, £12.7 billion of this is a one-off receipt from temporary repatriation rules. Compared to £1 trillion in annual government tax receipts, this represents just 0.4% annually - "a rounding error," as he puts it.
Is Everyone Really Leaving?
John conducted an unscientific survey of 79 of his clients with international aspects to their affairs, with a mean average net worth of £231 million. His findings challenge the exodus narrative:
54-60% are staying
10-15% are leaving or have left
10-15% are planning to leave in the next 3-5 years
Breaking this down further, around 70% of resident non-doms are staying, with only 15% having left. Importantly, these figures align closely with the Office of Budget Responsibility's projections from March 2024, which estimated 10-20% emigration rates.
The government had already factored in up to 25% of ultra-high net worth individuals leaving when calculating their revenue projections. As he notes, "25% ultra-high net worth emigration is already built into these numbers."
The Real Story Behind the Headlines
The perception of mass exodus often stems from selective statistics and social circles. The widely cited Henley report showing 14,000 millionaires leaving the UK focuses on dollar millionaires - a category that includes most people living in southeast England. This represents just 0.4% of dollar millionaires, meaning 99.6% remain.
More significantly, Treasury officials are closely monitoring the top 70 billionaires in the UK. Their behavior will determine whether Chancellor Rachel Reeves makes any policy changes. If 25% leave as projected (around 17-18 people), the system works. If significantly more depart, adjustments may follow.
New Opportunities: The Four-Year FIG Regime
For newcomers, the new four-year Foreign Income and Gains (FIG) regime offers genuine opportunities. Unlike the old remittance basis, this provides a true exemption - you can bring as much qualifying income and gains to the UK as you like without tax consequences.
Barnett reports increasing interest from potential new arrivals, including tech entrepreneurs who are "starting to hear that the UK still has some advantages." However, the message has been slow to penetrate international markets, partly because UK-based conversations have been dominated by reform concerns rather than opportunities.
Looking Forward: Technical Improvements Ahead
While major policy reversals seem unlikely, John expects technical improvements to the legislation. These might include clearance facilities for the temporary repatriation facility and possible extension of the four-year regime to UK investments.
The academic influence of groups like CENTAX (who have access to anonymised Revenue data) suggests future developments might include capital gains tax rebasing on arrival and deemed disposal on departure - similar to Canadian and Australian systems.
The Bottom Line
Despite the headlines and heated dinner party discussions, the non-dom reforms are largely playing out as the government predicted. While a meaningful number of wealthy individuals are indeed leaving, the majority are staying and adapting to the new rules. For those remaining, opportunities exist through family investment companies, insurance bonds, and strategic use of transitional provisions.
The key message? Look beyond the noise and focus on the numbers - they tell a more balanced story than the headlines suggest.
