The Treasury raked in almost £9bn in taxes from so-called non-doms last year – with the figure set to soar under a Labour government.
Chancellor Rachel Reeves is targeting non-doms to raise an extra £2.6 billion during the current parliament to help fund school breakfast clubs and support the NHS.
The move involves taxing foreign income and ending a loophole that allows non-doms to shelter offshore assets from inheritance tax.
However, finance industry experts warn that many wealthy foreigners and their families could effectively be driven out of the country, so reducing the predicted tax take.
Rachel de Souza at the accountancy firm RSM comments: “The most concerning point is Labour’s proposals to end the inheritance tax exemption for trusts settled by non-doms with non-UK assets.
Miss de Souza continued: “This one change will likely prove key in driving wealthy non-doms to leave the UK.
“The issue for UK plc is that many of those planning to go are exactly the people with the skills and abilities to grow businesses and the economy. In other words, exactly the sort of people that Rachel Reeves is keen to encourage.”
New figures from the HMRC show revenue from non-domiciled taxpayers jumped by £474m to £8.9bn in the tax year ending in 2023.
This was up 6 percent year-on-year and the highest total since the tax year ending in 2017.
The number of non-dom taxpayers in the UK grew by 7 percent year-on-year to 74,000, the latest figures showed. This was driven by an 18 percent surge in new arrivals, with 12,900 non-dom taxpayers moving to the UK in the tax year ending April 2023.
Wealth experts say there is already evidence that wealthy non-doms are leaving for places such as Italy, which has a flat annual charge of €100,000 (£85,000) on income earned abroad.
Nicholas Hyett, investment manager at Wealth Club, said: “Non-dom’s will soon be extinct in the UK, with the new government looking to abolish the tax status that many wealthy individuals use to shelter their international earnings from UK tax. These numbers are therefore a glimpse into the past, soon to be part of the fossil record.
“£8.9 billion of tax revenue is not to be sniffed at, and while taxing the rich might raise more revenue it also runs the risk that the global elite decide to move their taxable wealth somewhere with a lighter touch tax regime.
“The government’s task is to deliver an economic climate that’s more welcoming and ideally a good deal more reliable than the British summer has proven this year. If it can achieve that it has the potential to achieve the best of all worlds – a tax regime where the wealthy contribute more, but don’t feel the need to flee abroad to sunnier climes.”
More than two thirds of the £8.9bn paid by non-doms came from income tax, while £2.3bn came via National Insurance contributions. A further £384m came from capital gains tax.
But Labour insists the tax change is necessary. They say closing the loophole would provide more cash for other public services.
